Quality primarily, although convenience is a factor as well.

Video processing in cable boxes is typically dreadful, and sometimes not even that good. Video processing in players varies greatly, and processing in TV's varies even more widely. Having a central component with really good processing means you can output a signal at the display's native resolution (eliminating or minimizing the need for additional processing in the display) and disable processing wherever possible or practical in source components. The Model 978, for example, will use an Anchor Bay video processing chip (probably either 2010 or 2015, I forget if we've heard a specific chipset or not). The OPPO Digital DV-983H and BDP-83 both use the ABT2010 (although early 983H units used a pair of chips to achieve the equivalent of this one-chip implementation) and were considered reference-quality sources in part because of the capabilities of that chipset (aided by OPPO's implementation of the ABT).

There are standalone video processors that offer similar abilities along with video switching. The DVDO Edge, for example, uses the ABT2010. It sells for $800, and it is one of the more affordable video processor options available. Partly because of the proliferation of video processing in surround receivers and processors (and some higher-quality sources and displays), the market for standalone video processors has stayed small.

Aside from a few exotic surround processors, nobody is taking the risk of developing surround processors without video switching anymore. Market pressure is too great to fight against, particularly since we've got to feed our HDMI video signals through the processor. Once video switching is included, it is now necessary for that switching to include transcoding between input formats so that a single video output can be used for composite/s-video, component, and HDMI sources. Doing that requires some rudimentary form of video processing, especially when you're making the jump from analog to digital. (HDMI doesn't support 480i, thus requiring deinterlacing of 480i analog sources to the minimum HDMI resolution of 480p.) At that point, it starts to make sense to go ahead and do some reasonably capable video processing at the receiver or processor - after all, you've already included most of the features of a standalone video processor.