'This unit's S-jacks (input and output) and video pin jacks (input and output) have independent circuit structures, so that video signals input from the S-jacks are only output from the S-jack outputs and video signals input from the pin jacks are only output from the pin jack outputs.'
Yes the 3805 does do this, but as far as it being worth the extra money, I guess that's up to you really. If you want the upconversion but don't want to pay that much, you could always pick up a 3803 as that does the conversion also.
I was considering upgrading my 3802, but have decided to wait a while and put the money towards a new DVD player and a PJ instead.