I think it is fairly rare that upscaling is available via component, but that it is possible in some cases.
I chose HDMI for 3 reasons:
I'm running only a 1m cable and I was able to get a reasonable cable for about £13. With HDMI or any other other digital cable they should either work or not work - there should be zero difference between a £100 working cable and a £5 working cable. There can however be performance differences between component or other electrical cables. Plus HDMI cables are easy to detach and attach, unlike component which is a real bugger!!
Upscaling was available via HDMI.
I required the component inputs to attach my Freeview box (via an RGB to component converter).
I'd say go with HDMI as it is straightforward and easy.
I'll happily answer any more questions. You may also find it useful to have a read through a thread I started about my experiences with this PJ and DVD set up.
Considering your first projector? Read this!!