I agree with the previous post. In fact this is what I do; I use an Oppo 105 to
perform the audio decoding to analog 5.1 into a Krell HTS 7.1 and direct HDMI
feed (video only) from the Oppo to a Sony VPL-VW85 projector. The Krell HTS
7.1 is just acting as a 5.1 channel volume control. The results to my ears and
eyes are excellent.
You are correct, all blu-ray disc are 1080p, in addition virtually all also have HD
audio (DTS HD Master Audio or Dolby TrueHD either in 5.1 or 7.1 format, not
much of the latter). Whereas DVD is in 480i format with standard 5.1 DTS or
Dolby Digital audio (not lossless HD as used in blu-ray disc). For best results
upconverting 480i DVD images to 1080p, let the Oppo do this automatically.
The results are often very impressive. Not quite as good as native 1080p blu-
ray, but certainly better than regular 480i.