Ouch - Expensive projector. You've compared the competion right?
I really like the Marantz and Sharp high end projectors, but don't think they offer nearly the value for the money that they should.
Either way, that projector will scale, automatically, all incoming video to the native output of the projector of 1280x720. So, no matter what you feed the projector, you will be seeing 720p up on your wall.
Now, how good it goes from 1080i, 480i, or 480p to 720p depends a great deal on the processing of the projector. It may do an excellent job and look great to you. But, 480i is 480i and really won't ever look 'phenomenal'. Garbage-in, garbage out. But, it may have enough processing horsepower to do an adequate job.
The DVD player, of course, will convert 480i/p to 720p or 1080i depending on the player you get. You want to make sure you don't just 'buy' a DVD player as they aren't all the same and you definitely do NOT always get a lot more performance by spending more on the player. The Panny S77 is a excellent mid-line DVD player with good processing.
In the end, remember that this year we will see HD disc players finally hit the market and you may have access to movies in HD which will best the DVD content that you currently will be showing.
I personally would go with a lesser expensive projector and use the extra cash to upgrade my system in many other areas. Just a worthless opinion thrown in though.