Ok, I posted an official request to the HK website, seeking remedy for the upconverter/component out problem. They replied at 'Level 4 web support' soliciting for more information, as hessel experienced.
I provided them this basic information, in direct response to the range of questions I received:
Quote:
My monitor is a Panasonic TH-50PHD5UY. It's a 5th generation model that offers VGA, composite and component video inputs. It's the commercial model, which provides BNC-style connectors for the component video inputs. I have small converters to RCA-style connectors on the component display outputs, since all of my component cables are RCA-style.
The length of the cable running from the AVR745 to the plasma is about 36 inches.
The length of the cable running from the AVR745 to the input sources varies, but none exceed 36 inches in length. The input sources I have are Digital Cable (Scientific Atlanta Explorer 3250HD), a Panasonic XP50 progressive scan DVD player and an Xbox 360.
The cables are unbranded.
The video processor problem is demonstrated on any input set to:
- VIDEO PROCESS: FAROUDJA
- OUT VID FORMAT: 720p or 1080i
- IN VIDEO FORMAT: 480i, 480p, 720p or 1080i.
When the video output is set to 480p, the bug does not manifest (the image is correctly positioned and uncompressed), although with higher resolution input the AVR interrupts with the 'video output may not be lower than the input' message..
The tech replied with the news that all of this information has been forwarded to the engineers, as they are asking for configurations to test against. This sounds good to me.

He also interestingly asked if I was in discussions about the problem on the AVS Forum- that he was trying to help another guy who'd mentioned that 'someone else on the forum was reporting the same behavior.' I conceded that I was probably the 'someone else' and directed them here for more details.
So if you guys have any other experiences, please post em.
I am optimistic that they'll at least come back with a root cause soon...