Well, you press the HD/SD button on the remote, and when the blue light comes on, it's outputting HD, either 1080i or 720p depending on what you selected in the on-screen menus. So it is upconverting.
However, it does a pretty lousy job. That's why most people hook up both an HD connection and an SD connection, and switch to SD output mode when receiving SD content. Letting my Pioneer Elite upconvert to 480p results in a much better picture than letting the receiver upconvert to 1080i. It also enables me to use the TV's stretch modes, which are more useful than the modes the TV offers.
-Jonathan