Any HDTV must include some video scaling capability in order to display the various resolutions that are provided to them. The reason that DVD player manufacturers like OPPO are putting such emphasis on doing this at the player is that HDTV's often include only marginal video scaling capability. Some HDTV's include some really impressive scalers, but many don't.

The native resolution is the number of pixels. There are often modes on 768-pixel displays that allow you to do 1:1 pixel mapping so that 720p is displayed using the middle 720 pixels and leaving the other 48 rows of pixels black. If that mode is not used, 720p sources get resized to 768 (which is a relatively easy process compared to deinterlacing and more drastic scaling).

The PS3 is reportedly not a particularly good DVD player (scored a 61 out of 100 on the Secrets benchmark). An OPPO would probably be a good upgrade over the PS3 for DVD playback.