Scalers actually take the 480p, 720p, 1080i or whathaveyou signal, processes it (de-interlace for XXXi signals and progressively scans the signal), then outputs it to the specified resolution. You are correct, they upscale the signal.
Check out DVDO.com. They offer scalers in the $1200 to 2K range. I was thinking of the iScale HD+ in particular, which scales up to 1080p. The MSRP from DVDO.com is $1500. Play your cards right and shop around, you probably can find it a little cheaper. Plus they have liturature for scalers in general and how DVDO scalers work too.
The VP20/30/50 are a little more expensive the higher you progress but they also offer 1080p and are better processors. IMO, they have a scaler that might fit your budget and offer the performance you're looking for.
Check out DVDO.com. They offer scalers in the $1200 to 2K range. I was thinking of the iScale HD+ in particular, which scales up to 1080p. The MSRP from DVDO.com is $1500. Play your cards right and shop around, you probably can find it a little cheaper. Plus they have liturature for scalers in general and how DVDO scalers work too.
The VP20/30/50 are a little more expensive the higher you progress but they also offer 1080p and are better processors. IMO, they have a scaler that might fit your budget and offer the performance you're looking for.