That equipment is on the bleeding edge to an extent. It says it passes the new DTS HD and Dolby True HD. It does not say it can decode them however. To pass these signals the cables have to be HDMI 1.3 as the bandwidth of the signal is greater.
If past experience with HDMI is a guide, there will be bugs in the new standards. May be you are one of the first to find out.
I would still have the TV do the up conversion, not the DVD player. When playing HD discs it should output at 1080i and there should be no need for an up conversion.
I do know that the unsatisfactory Hollywood crowd are so paranoid about piracy, that these new DRM codes, including those in HDCP, direct down coding to 480i at the "drop of a hat." If everything is truly HDMI 1.3 and fully HDCP compliant, if it does not work, then this is likely the issue, but you try and get anyone to admit it!