The projector will know if the signal is already scaled and doesn't need to do anything.
Usually, the best place to scale is in the digital domain. In other words, in the case of a DVD it seems ideal to scale in the player. Otherwise, you convert digital to analog then back to digital again. If you can scale in the player the signal can remain digital all the way through to the display (which is also digital).
That said, the quality of scalers varies widely. Some scalers built into televisions, for example, do a great job even with component sources. There are extremely high-quality scalers available for the broadcast industry -- typically separate boxes.
So, the short answer is: use the scaler that works the best for your source material.