Does Bluray player upscale to TrueHD or DTS -HD  

No and no. That's an interesting idea, but there is no such things as audio upconversion on blu-ray players. However the blu-ray versions of those titles will have better sound quality than the DVD versions, even if your stereo can't play the HD tracks.

I'm not so sure about that. Since a blu-ray player will output the dts lossy core or the add-on dolby digital lossy track when sending to a receiver not capable of handling lossless audio, I cannot see where that would automatically be better than the lossy audio track off a dvd. If the receiver cannot handle even lossy dts, then it could actually be fed a 2 channel pcm track - which would probably be lower quality than a proper dolby digital track off a dvd? If the receiver has multi-channel analog inputs, then lossless audio might still be an option.

The lossy versions on BD are encoded at higher bitrates than are used on DVD. These higher bitrate versions sound about as good as lossless. It is rare for an AVR to be unable to process lossy DTS.