There will always be one limit: the number of inputs that can be selected on the remote. After all, the ability to define two dozen different inputs isn't going to do you much good if you have to scroll through a huge list to get to two-thirds of them. Discrete input selection is pretty indispensible, at least in my opinion. That's the reason that you don't see anybody building a processor that allows you to "add" sources. If we accept the limitation of a finite number of inputs, then the scenario that you describe is actually more or less feasible right now with the 990 (as long as you can work around the fact that analog inputs and s-video/composite video inputs are permanently assigned to their respective sources).

Oh, and just to be nit-picky (and because it's so often a source of confusion), HDMI v1.3 will probably never be included in standard DVD players because the features that it adds are not applicable to players like that.