With some of the least expensive equipment on the market you are going to get quality that is easily rivaled, but should work well for your budget.
The Sylvania actually produces one of the better images I have seen, but I believe it lacks a HDMI input which means you may never be able to upgrade to HD discs. If both component hook ups allow for HD, then the receiver has nothing to do with connecting video to the display.
Run component out of the DVD player and out of your HD cable box/sat box to the plasma.
It does not appear that the DVD player offers progressive scan, but even if it did, I would doubt it would be any better than what the plasma already does internally. Take a look at the (weak) owners manual if you haven't:
http://www.polaroid.com/service/userguides/ce/dvd_players/dvp1000_ug.pdf
Audio may suffer a bit due to the age of the receiver, but if connected to decent speakers it will sound okay. It does appear though that this is a stereo receiver, not a surround receiver, so no surround, probably no digital audio inputs, etc., etc.
Your Sylvania would benefit greatly by using a decent DVD player (think $200ish) and your audio experience will jump by many levels by going with a decent entry level surround system (think $700ish - maybe $400 if you go with an Onkyo HTIB setup).