S-Video doesn't carry HD in its native form, so the above statement is incorrect.
You are accurate in your statement that things are redundant. But, here are some considerations.
1. A DVD player has digital out and analog out... sometimes it includes 6 analog outputs. The best way is often considered to use the 6 analog outputs if available, but some would say that keeping it digital to the receiver does a better job. It's a good question actually and depends on how good the DVD player does at decoding the 5.1 signal.
2. The idea of using your receiver to upconvert to component 480i/480p/720p/1080i is also dependant on how good the processor is inside your receiver that does this.
3. Using an outboard processor instead of the one built into your receiver... Well, it depends on how good it is and whether it is better than the processor inside your projector.
4. Using the one in your projector: This one is almost ALWAYS on and doing work. Projector or plasma, doesn't matter. If you have a fixed pixel device (let's say 1365x768) then it always transforms the 480i, 480p, 720p, and 1080i image it receives and displays it at the display's native resolution (1365x768p). Some do a much MUCH better job at processing than others, and some handle some resolutions much better than others.
This is why trying out products, working with good return policies, and doing your homework before you buy is so important.
Like the new Sony LCD projector. It is adequately bright, has good contrast and a a nice price point. The projector looks great with HD material (720p, 1080i). But, it's ability to process non-hd is terrible (so the reviews say). So, it is recommended that you use a better outboard processor, like the DVDO to convert your non-HD sources, to HD, then send it on to the projector for display.
Are you doing redundant work and is stuff being doubly processed? Yes, but this is often the case and with the Sony is necessary to get the best possible image out of the projector.
One of the single most important processors in the lineup is the one inside the projector. It is the one that is always (almost) active and is constantly reformatting your incoming signal to fit on the display. A cheap internal video processor will mess up your image and just make the entire viewing experience poor. It may be bad on one or two formats, or it may be bad across the board. It may be EXCELLENT across all inputs though... and if it is excellent, then this is usually reflected in the price you pay for the projector.
Home projectors quite often have better processors inside of them to deal with motion than business projectors do for exactly this reason. They need the better processing for the higher demands that DVD & HD motion broadcasting puts on them as opposed to Power Point displays that just sit there looking pretty.
Bottom line: If you look at a good receiver that has internal upconversion, that does a GOOD job with internal upconversion, then use it! Don't bother with the DVDO as it may only be a marginal, to non-existent increase in quality. But, if you go with a basic pre-amp, you may want the DVDO to do the work for you.
Or, look at a projector that does a good job with conversion and run everything to the projector native composite, s-video, and component.