Excellent summary of the TANSTAAFL concept. Video switching was something that took us years to get to a level where it might be done affordably without image quality compromises, and by the time that we started seeing products do component video switching at a nice price we started wanted to also have transcoding in the mix. Now that transcoding is becoming common (albeit still exhibiting problems in some cases), we also want conversion to digital and video processing (3:2 pull-down, deinterlacing, scaling). And of course we'd prefer to not have to pay a significant premium for all of it.

One caveat that I will add to your comments about the scalers in HDTV's. Some are very good indeed, but some are really not - it's that uncertainty that has made the various upconverting DVD players such a topic of interest. If you have a TV with a good scaler, you may be best off giving it a digital 480i or 480p signal to work with, but if the scaler's a bargain-basement chip stuck in there out of bare necessity then a player with a good scaler may serve you better.