You seem to think like I do.
Price increases generaly reflect more features as opposed to "true" performance improvements. By separating the features you really need as opposd to what they can throw at you, you can get some pretty decent performance at bargain prices.
Unless you intend to use your receiver for all switching functions (which would require all sources to be up-converted to HDMI), you gain nothing from paying more for upconversion features in a receiver.
As an additional benefit of using the separate audio/video selection methods, along with the digital outs to the receiver, you can run the red/white analog outputs to the corresponding (to the video inputs) red/white audio inputs on the TV. This allows you to play the source and the TV, using the TV's internal speakers when you wish. You don't even have to turn the receiver on here. Just turn the TV volume down when you want to use the receiver.
Personally, I don't always want to use the big system for most shows. Who needs the news or sitcoms in 5.1? ...not to mention the kid's stuff.