if you choose any interlaced resolution, the projector will do the job, but if you choose progressive resolution the PS3 will do the job.
Let the PS3 do the job and you will see some difference.
choose 720p or 1080p. In this case (Optoma HD65), maybe 1080p has a better quality in terms of upscaling a SD DVD.
You need to re-calibrate when you use differents sources at the same conection, like HTPC and PS3 via HDMI.