seth, thanks for the info, its a lot to take in. So if the TV itself is doing the conversion of the signal then what do the components offer? If I get the RXV 2700 run an hdmi from my DVDs1700 to the 2700 and from the 2700 to the tv (which i plan to be 1080p) which component will be taking the resonsibility of converting the video signal?
Which ever component you chose. It is likely that at decent brand 1080p display will have a superior scaler to that of the Anchor bay one found in the Yamaha (not that the Yamaha is bad receiver, just that it having a scaler is rather gimmicky). How much can you get the Yamaha RX-V2700 for?
What you can do to find the best performing scaler is try different setups. First attempt you set the DVD player to 480i (meaning no upscaling or progressive scan). Run it through the receiver as pass-thru (meaning the scalers on the receiver are deactivated and the video signal passes through the receiver unprocessed). When it arrives at the TV it will handle all the scaling and deinterlacing automatically. HDTVs must automatically adjust inputs to native resolution otherwise inputs will not be displayed, the TVs scaler will always be used unless it receives its native resolution from an appropriate source. For example; if you had a 1080p display the only time it would not be scaling is if it was sent signal 1080p signal from an HD DVD player, Blu-ray, or computer.
Next you could follow all the steps I just listed with one minor change, by setting the DVD player to progressive scan (480p) to see how well it deinterlaces, or how poorly in comparison to the TV (it could be either way, but you won't know unless you try it).
Next you could try using the scaler in the DVD player to 1080p, with the receiver still set to pass-thru.
For this next one bring the DVD player back down to 480i and use the receiver's on-board scalers to 1080p.
And lastly try the last one again with 480p on the DVD player activated.
Choose the one that looks best to you. Try pausing a certain scene in a movie that has some jitter issues, scenes with detail and high contrast.