Oh, and HDMI isn't the end all be all of video connections. I've read arguments from videophiles that component cables (the red/green/blue ones) are actually better for some reasons, but the industry has set HDMI as the standard b/c they have more control or make more profit or some such. All I know is I've watched HD video from the same source piped through component cables & then HDMI & couldn't see any difference in quality. The biggest difference is HDMI is digital (which means spending extra money for a fancier cable is a total waste b/c it can't pick up interference while sending 1's and 0's. It either works or doesn't) while component cables are analogue (which means getting a better, more expensive cable CAN make a difference in signal quality with regards to interference). I guess the one caveat is you'd need to get a player that still has component output, which i guess might be a little more difficult since HDMI is becoming the standard from what I've seen.
Forgot to mention that I've never personally heard of downconverting to 480p over component cables... That sounds kind of fishy & a bit ludicrous to me...
EDIT:
I did a little searching and on avsforum that discusses the difference between HDMI & Component with regards to the PS3 (my bluray player of choice). It sounds like the issues you mentioned regarding component cables & upconverting might be true, though I'd never heard of (or noticed) them...
But it sounds like that only has to do with upconverting DVDs. Which, if true, would mean in your case DVDs would stay at 480p instead of geting upconverted, but you could still watch blurays at 720p (or 1080i, if you wanted I guess). So I'd still say it's worth it.
You know what the real answer to your situation is... Get a new 1080p projector!!
