All fixed-pixel displays (LCD/plasma/DLP/etc) will scale to the TV's native resolution. So if you input a 480p signal (from a progressive-scan DVD player) the TV will scale it so it takes up the whole screen.
Even if you're using an upconverting DVD player to scale a 480p DVD to 720p, a "720p" TV might still have to do some scaling, since many "720p" TVs actually have something like 768 lines of vertical resolution. So there's still some scaling done by the TV, even though the DVD player is outputting an upconverted 720p signal. The only time that a fixed-pixel display will not do any scaling is if your upconverting DVD player can output a signal that's of exactly the same resolution as your TV's native resolution.
As far as what does the better job of scaling, the TV or the upconverting DVD player, that really depends on the TV and on the DVD player. Some TVs are better than others, and some DVD players are better than others.
In contrast to fixed-pixel displays, some CRT HD displays can display 480p natively, without any scaling.