Distributed Video Coding (DVC) is a new paradigm in video coding, which is receiving a lot of interests nowadays. Side Information (SI) generation is a key function in the DVC decoder, and plays a key-role in determining the performance of the codec. This paper proposes an improved motion compensated frame interpolation for SI generation in DVC, which exploits both spatial and temporal correlations in the sequences. Partially decoded Wyner-Ziv (WZ) frames, based on initial SI by motion compensated temporal interpolation, are exploited to improve the performance of the whole SI generation. More specifically, an enhanced temporal frame interpolation is proposed, including motion vector refinement and smoothing, optimal compensation mode selection, and a new matching criterion for motion estimation. The improved SI technique is also applied to a new hybrid spatial and temporal error concealment scheme to conceal errors in WZ frames, where the error-concealed results from spatial concealment are used to improve the performance of temporal concealment. Simulation results show that the proposed scheme can achieve up to 1.0 dB improvement in rate distortion performance in WZ frames for video with high motion, when compared to state-of-the-art DVC. In addition, both the objective and perceptual quality of the corrupted sequences are significantly improved by the proposed hybrid error concealment scheme, outperforming both spatial and temporal concealments alone.