No problem at all. It's not really a question of 1080p being better than 1080i here - basically the main difference between upscaled DVD and Blu-Ray is, DVD's native format is 576p (so 576 vertical lines on the TV) in the UK so if you were to show that natively on an HD Ready set, there would be a small image of the DVD in the middle of the screen surrounded by black bars on each side where the image didn't fit. To ensure the image fits an HD ready TV's set, upscaling is done where extra information is filled in to make the image is the correct size on the TV. Depending on how good the upscaling chip is will depend how good the picture is.
With Blu-Ray, because this is actually a native 1080p image, no filling in of information is done. In fact on your TV, it will actually have to downscale the picture to 720p to fit on your screen. Think of it like a digital photo. If you take a small photo and enlarge it, you lose the quality of the picture and it begins to pixelate. Software can be used to enhance the picture, but it will never be as good as it was before you enlarged it. Now take a large photo and make it smaller - you won't lose any quality as no extra information is having to be made up to make it. This is why Blu-Ray will look better than upscaled DVD.
Oh, the reason I asked about your surround setup was, Blu-Ray actually offers higher definition audio as well. This is actually another main selling point to Blu-Ray but unfortunately your current system won't be able to take advantage of it. However, you should notice a slight increase in quality with Dolby Digital and DTS soundtracks on Blu-Ray over their DVD counterparts. If you really start getting into Blu-Rays though, at some point you might want to look into an upgrade on the surround system to take advantage of the upgraded audio, but you should be very happy with the picture performance alone.