OK, I think I understand your question. Think of your picture as lines of resolution. This is the number of vertical pixels in a still image but with TVs we talk about the full line. The best standard defintion video was 480 lines in the U.S. For something like VHS, the number of lines was around 240 to 300 lines. No matter what you did with those old tapes there was no way to get those missing 240 lines back. They just weren't on the tape and certainly no processor at the time could interpolate the missing lines. However, there were some tricks such as doubling the number of lines that kind-of sort-of made the picture look better. The lines were just duplicates but the picture looked a bit better.
Now going to the present day, high definition is either 1080 or 720 lines of resolution. So, compare that against the best standard definition and you'll see that the difference is as much as 600 lines (well over double). Now that yellow composite single cable was, at best, able to carry 480 lines of resolution and it combined the color and luminosity (brightness) signal all as one, which also caused some issues. As soon as you convert to composite video, you are throwing away those 600 lines as well as combining other information into one signal. That information is all gone.
Now the box on the other end can receive this signal over the composite cable and fill in the missing lines. But it doesn't know the information in the lines so it has to "guess" at it by looking at adjacent lines and trying to figure out the missing pieces. With this conversion, in some cases, it is having to fill-in two adjacent lines. No matter what, this doesn't give you back your original picture. It gives you back the algorithm's best guess at your original picture.
If that wasn't true, we would all be using composite video cables since they are much easier to work with than HDMI. But, HDMI has other advantages that (maybe) make-up for its complexity.
Also keep in mind that any conversion between HDMI and something else (where it is allowed) requires a powered converter. The exception to this is DVI to HDMI, but that is another story. The bottom line is that once you add up the costs of these converters, your "Black Friday" special won't seem so special anymore. Really, if you want to give up HD (or any DVD upconversion) and use composite video, the best thing would be to return the Blu-Ray player (even if you got a great deal) and get something your parents can actually use.
I think the real question is whether your parents really care about HD or are just as happy with a standard def system. In which case return the Blu-Ray and get them a good DVD player, while the DVD players still exist. You'll then have a composite video output and it will be cheaper. Unfortunately, even the best 1080p HDTV will not be able to make a DVD look like high definition, although they are getting better at that. As far as upconversion is concerned, you realize your TV already does this, right? It has to in order to convert any standard definition picture to its high definition screen. It's really a question of whether the Blu-Ray player over HDMI is better at this or their new HDTV is better at it.
Now component video is a different story. Component video can handle up to 1080i and 720p. So it is a high definition interface. You said earlier that component video didn't include a digital conversion. That is incorrect. The video is stored on a Blu-Ray or DVD in digital format. The difference between component video output and HDMI output is that the digital to analog conversion is done in the player with component video and is done in the TV with HDMI. So, component would give you an excellent picture. However, as far as I know there are no longer any Blu-Ray players with high definition component video outputs. This was done by the industry because the movie studios were nervous and paranoid about someone copying their movies using the component video outputs. Only players that were designed before 2011 have high defintiion component video outputs.
So, bottom line - you have to choose between the TVGuardian box and High Definition. You can't have both. Once you choose, your path will be clear...
Edited by alk3997 - 12/2/12 at 8:56pm