1st question, I am not the best person for this, since I am in Penang! Check with htkaki and maybe he can help you.

Good question. The quality of the the upscaler and deinterlacer in a AVR vs a DVD player is always asked.  This really depends on the quality of the chip that they use inside. The well known upscale chips are HQV Reon, HQV Realta, Anchor Bay VRS, Faroudja DCDI, Mediatek 1389. Of these I believe the HQV ones and the Anchor Bay is one of the best. If u r a person who views a lot of DVDs then I would advise you to get an AVR or a DVD player that has this. The AVRs that use HQV chips are the Onkyo 876, 875 (there are some problems with the implementation of the Reon here), 906. Denon 5series I believe uses Realta. DVD players, I guess only Oppo uses Anchor Bay. Will u see a difference, yes if you look. If you are not a fussy person, the Faroudja should be more than enough. Remember that all HDTV have scalar and deinterlacing chips as well. The chips that reside in the Pioneer, Sony and higher end Samsungs will most probably be better that the Faroudja and Mediatek solutions.

Do not expect miracles from these chips. It all depends on the source. If your source is badly mastered DVD (pirated), of course the higher quality chips will do a better job.

The choice of getting a high end DVD player or a AVR with high end chip or leaving the job to the display to do the job is something that you must since you are the one watching the movies.

In my opinion, the Reon is a pretty good upscaler. I have not seen a Faroudja (7xx and 6xx shd be using this) in action in detail. Comparing the Mediatek 1389 (found in Pioneer DVDs players) with the Reon, there are clear differences in my eyes that the Reon is better. The toss up between the quality of the Reon and the in built scalar/deinterlacer in a Pioneer Plasma is very close. Both have its pros and cons.

If you want something better, get the Oppo DVD player or better yet the upcoming Oppo Blu Ray player.

I know it sounds confusing but it is not. Buy whatever soothes your eyes and your pocket.

Pioneer DV410 is a pretty decent DVD player. You can experiment which gives you a better picture. It is important that you send a clean signal to the AVR amp should you use the upscaler. Pioneer DV410 can send a 480i/576i signal thru HDMI.  You can try to see which looks better to your eyes, the DVD doing the upscaling/deinterlacing (since this DVD player can upscale as well) or your AVR. Toshiba XDE has a supposedly good DVD player as well. Both will work.

The Oppo is ~ USD499 (Blu Ray and DVD), or for the older DVD only it is ~ USD200 I think. You can get it from SLTech in Spore no distributor in Malaysia. Its a pretty expensive DVD player, I think it would be better to get the Blu Ray player since it will also play SACD and DVD Audio.

China/Malaysia/Asian Made(believe me I think 90-95% of the DVD players in the world are made in our region!), if it does not mess up the picture then ok. Preferably one with HDMI out, and one that can output as 480i/576i. Worst case 480p/576p thru HDMI. If not, make sure it can send the picture thru component outs. If the AVR has a decent chip there should be improvement. Do not rule out that the scalar chip in your display might be better than all this!