do those new 1080p TV's upscale video sources, such as if i'm watching my cable TV and i know it is broadcasted at 1080i, will those new 1080p TV's actual upscale and improve the image to 1080p? or are those TV only giong to make a difference when watching blu-ray or HD-DVD?

The plasmas (and I'm pretty sure LCDs too) I've looked at don't have the ability to deinterlace 1080i to 1080p; that work needs to be done at the source or a video processor. There is plenty of confusion out there about 180p so just a word of caution, make sure the display or projector you are looking at not only accepts 1080p signals but has the resolution to display them. Also, the ability to see the impact of a true 1080p display is dependent upon how big it is and how far away you sit.

All HDTV's must include some deinterlacing and scaling hardware because of the wide assortment of input resolutions they encounter. If the display actually operates at 1080p (meaning it's a 1920x1080 or similar resolution and displays progressive scan rather than interlaced), then it will of course have to deinterlace 1080i sources just as it'll have to scale 720p and 480p sources and deinterlace/scale 480i sources. Whether that 1080p display will look appreciably better than a 1080i display depends on a lot of factors.

Secrets recently published this article about 1080p that might be of interest.