I also have a similar scenario as darshan_4. At the suggestion of my brother, I need to seriously step up my home theater game (seriously, he won't even watch a movie at my house if I use my home theater, it is THAT bad).
My set-up is a Sony 52V5100. I have a Samsung BR BDP-1600 (I think) with tv from direcTV (HD-DVR HR-22). I am looking to start with a better receiver. I would like to keep it under $500 (my current 5.1 Pioneer is 8 years old so I figure anything will be a significant step up at this point). I have a Polk Audio suround speaker set (the typical $399 set from Best Buy) with a slightly higher model polk sub. I also have a set of outdoor speakers connected to the same receiver on the "B" speaker channel so that we can listen to XM radio by the pool. At this point, I CANNOT use the rear surround speakers to watch a movie without my neighbors also enjoying a late night, louder volume Top Gun intro. I am going to start with a better receiver and then move onto speakers from there.
From what I read here, in this price range I probably shouldn't even worry about a AVR with upscaling. I like the HD picture from the satelite box now but standard def, especially Fox Soccer Channel, is just bloody awful. The DVR is run via HDMI so my question is, would an upcoverting receiver make ANY difference given that signal is already coming in via HDMI. I'm not opposed to moving up a couple hundred in budget here if it would make much difference.
Ideally, I would like to get a quality receiver that I can use my 5 speakers plus subwoofer for movies and TV use while being able to keep the pool deck speakers off. The units I am looking at are the Onkyo 7.1 607 series, the Denon 1910, Denon 790, Pioneer 1019 and Sony STR-DG1000. If any of these provided a better picture, great! But if that should not be a consideration in this price range, I would greatly appreciate a point in the right direction on receiver quality to build a better system. By the way I'm new to this forum sight so if you need additional info that is normally included, please feel free to ask!