I have read about all the theories behind PS. In fact, I successfully explained to my wife who is, shall I say, technology challenged. I have a older Panasonic DVD player which has Component Video Outputs but no PS. I also have a Hitachi 57S700 HDTV. I recently upgraded the DVD player to a Sony PS with the PS button in the front penal that I can turn on and off. I see absolutely no difference between my Panasonic non-PS and the Sony PS on/off. Yes, my TV does up-convert any non-HD contents to 540P. Is the up-convert that good that it makes the DVD PS unnecessary?
Progressive scan is a "day and night" difference from standard interlaced, especially on a big TV. There's no way you'd miss it. Your TV is probably doing as you suggested with the upconversion. If you feel cheated, look at a big screen that doesn't upconvert the standard interlaced. The difference in clarity and edge definition (especially on moving objects) will be noticably poorer.