If you have a good S77, then I would keep it in place as it is one of the best upconverting DVD players that was released. But, it is still not in the same league as Blu-ray. If you have the inputs available on your receiver to support an additional HDMI source, or are willing to use an outboard HDMI switcher, like the one from Monoprice, then you are really good to go.
Pick a player... any player. I would likely go with a Panasonic... but the PS3 is still a bang for the buck overall leader for both quality and versatility.
Will you notice a difference? HANDS DOWN YES! I have tried several movies on DVD & Blu-ray directly and the difference is significant on my 540p projector. The higher resolution projectors will only enhance this difference more.