You have what paired up with the SKS HT-540???
You have what going in to an Epson Pro Cinema 1080P projector???
Is "it" upconverting your signal, or is the DVD player upconverting and sending out a 720p or 1080i signal?
Anyway, have you tried to run your cable box in 720P? A progressive scan feed may help smooth things out.
Pure Audio is just what it says. No video. No processing. Straight in, straight out pure audio.
Is your DVD audio menu set to stereo, Dolby digital 5.1, Bitstream, Raw or LPCM? Are you even using coax s/pdif or optical audio?