Right now with my 990, I'm using the Digital RCA/Coax input from an Adcom CD changer from the mid-90s. I guess if I upgraded to the 978, it should sound better using this same connection, due to the different DACs in it.
I would expect so. The ESS chips I've used in the BDP-83SE and BDP-95 have both been really excellent sounding.
Also, I'm using a Panasonic Tube 36" HDTV from 2001, and all it has is 2 sets of Component 1080i/480p HD inputs. One is connected.to the HD DVR cable box and the other is connected to the DVD player. I see 3 sets of Component video inputs on the 978, but no Component video output. That means I couldn't pass-through my video through the 978. Naturally, whenever I update my TV, that wouldn't matter since those all have HDMI, but that might still be a couple years out.
Correct - they have an ABT chip in there for video processing, which would only really be available for HDMI output. Rather than have a component output that missed all that, they've done HDMI only. If you upgrade, you might want to consider a device like HD Fury to let you start using HDMI for everything upstream of the TV. It will convert the HDMI to component just before your TV.
By the way, is there still planning to be a 998, or just the 978?
As far as I know, the Model 998 is still planned.