Hi Flairdj,
Thought i'd give some of my experience with the upscaling of the PS3. Simply put, its excellent. I used to have a Denon DVD-2910 and when i compared it to my Sony DVD recorder (RDR-HX970), the Denon was much better. I bought the PS3 and it bettered the Denon although the Denon could not upscale to 1080p (only 720p and 1080i).
My local dealer was very kind to lend me the Denon DVD-3910 as well as the Marantz DVD-7001 (both upscale to 1080p). I compared both to the PS3 and neither were as good! Edge defintion, colours and motion were all much better on the PS3. I was astounded by this and so got other family members and friends to check it out and every time, on every comparison the PS3 was picked as the best! I had plenty of time to do the comparsions (about 2 weeks), with lots of DVD's.
A few points though. All DVD players were tested via 'pass through HDMI' to my Yamaha RX-V3800 receiver, then through a 20 metre Chord HDMI Silver Plus cable to the Panasonic PT-AE2000 projector. I didn't test it on a TV. The Bluray function on the PS3 is very accomplished, but not the best i've seen (that goes to Pioneer!). New PS3's will be released soon in 80Gb and 160Gb sizes. Lastly, if you are only looking for a better upscaling DVD player, i'd hold out fot Toshiba's forthcoming XDE DVD players ($150, Stateside), which apparently, upscale incredibly well...ironically, they are said to be using half the PS3's Cell processing power in order to upscale the images!
Hope that helps,
Raihan