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I assume you don't have HDMI since you are asking about component. If you want to route your video through the AVR, then the AVR should have component switching, if not, just use the AVR for audio and use the component video input on your TV. It is advantageous to have component video switching in the AVR if you have several devices that have component video and you want to just use one input on your TV.
 

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As you expand your sources for HDTV, it generally will become important at some point. If yoru display has lots of inputs and multiple component inputs you may be able to get around not having it.


These days, I really need robost video handling capabilities in my AVR. To many sources to deal with period.
 

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component is great for those times when HDMI mysteriously "won't work".


For 480p DVD's, component may look "better" than HDMI, which can look somewhat harsh when upscaled to a higher resolution. It's all up to the viewer, but I like the component output from my Sony upscaling DVD player better than the HDMI. It's not an HDMI fault, it the quality of the upscaler in the Sony unit.
 
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