I guess some dedicated Blue-Ray players may upscale, but I don't know. The PS3 upscales (with recent firmware) and is pretty OK on DTS/Dolby support too. So, it's a good all-rounder. It plays games, stores photos and music. The hard disc is easily upgradable. It's a bit iffy, I think on DTS-HD, but not many recordings out yet and its only going to affect you if you have a DTS-HD amplifier too. For most standard DTS and Dolby 5.1 is good enough.
Most TV's do a form of upscaling itoo, so maybe don't get hung up on it.
Fact is that an upscaled DVD is not as nice as a true 1080p Blue-Ray disc.