That would describe the behavior if the Panny was sending 1080p. Those controls (hue, brightness, contrast, color) still work but not the DNR and edge enhancement, etc. Any chance that's the problem?
By comparison, I have the Denon AVP pre-pro with Realta T2 and an Oppo BDP-83. If I send a 480i signal from the Oppo to the Denon it outputs an awesome 1080p picture (ok, as awesome as SD can be) and those controls actually work (same for 480p). So something is wrong.
I have to say the Oppo and the Denon are about a toss-up for which one does the best SD upconversion. I haven't decided yet.