The OSD will not be added to a 1080i source.

If you had a scaler located after the 970, component sources would still not get an OSD overlay (I believe that would be true even of 480i component sources, although I could be mistaken about that). S-video sources would definitely have the OSD added to them, and that OSD would "come along for the ride" when the signal was transcoded to component and when it was then scaled up to 1080i by the external scaler.