I have a few R2 PAL discs that I watch through my CI scaler with a 800 x 600 DLP projector. Even though I am in R1 my Apex player will output native PAL which my projector can display. So all the CI is doing is upscaling to 800 x 600. The results are excellent, and the native PAL image looks much better than what I get when I let the Apex do PAL to NTSC conversion.
So to answer your question: if the CI can upscale to 600p with such good results, I have little doubt that it will downscale to 480p just fine.