from what i've recently learned (and it ain't much!) it all depends on the quality of the upscaler being used, regardless of where it's located (in the source, avr, or tv).
in my situation, the best upscaler in my system resides in my avr, so i send 480i to it, let it do the upscaling to 1080p and then let my tv just play the signal without further scaling or deinterlacing. i made that decision after testing all the scalers in the system and chose the one that resulted in the best picture quality. you should do the same experiment and find out which works best in your system.