If you are upgrading your display device then you most definitely want one with DVI or HDMI inputs on it. You don't have to connect anything that way right away, but you want that upgrade path for whatever you end up with down the line.
Component video is, currently, the only way I feed all my displays. 1080i and 720p, and to some extent, even 1080p really have no issues sending their signal over component video. Likewise, 480p, and 480i signals are possible. Jumping up to HDMI/DVI (digital) connections do not necessarily even improve the image at all, but many times, keeping the video entirely in the digital domain helps to improve overall image quality.
Now, IMO, if you are thinking about going to something like the Panasonic S97, then I would hook that up via HDMI directly to the display, then run digital audio out of the DVD player into the receiver. That way you get the upconverted digital video signal as well as the best possible audio signal out of that DVD player.
Outboard HDMI switchers are also available for under $150 if you want to add additional HDMI devices down the road. Not to expensive, and no reason to upgrade your AV receiver if you don't have to. To many people think that the ONLY way to switch HDMI is to go out and buy a $1,000+ receiver instead of buying, say a $500 receiver, and a $150 HDMI switcher. If you have a decent universal remote, it all ends up working the same way when you are done.
Also: Check out the Oppo 971 - I believe it may upconvert over component video.