Downscaling wouldn't be a "feature", which is why receivers don't offer it.
Some receivers actually do offer it, I know both of my receivers do, and it could be considered a feature for some people in certain scenarios.
This is from the owners manual of my RX-V1800, every video source can be output on HDMI regardless of quality, but only component and below can be output on anything other type out output, Component, S-Video, or Composite. Granted, outputting signal on a lesser quality output will not get you any quality, but if I have a TV that only has S-video or composite video, and a dvd player that only has component video out, I can still use the dvd player... but for someone like myself, if I were in that situation, I would just upgrade tv's
