Well I would say on a small screen like yours it's debatable but 720P is a a step up from 576p. Plus the DV600 is cheap as chips so why not? It's also future proof if you choose to upgrade your screen to something bigger and better it upscales to 1080P.
I recently bought a DV-600 (my Denon 1920 collapses in a heap half-way through any movie!) - and I have a Panny TH-37PV500. In most cases, I find (as I did with the Denon) that 720p gives the best picture.
Probably has something to do with the fact that the 37" Panny's native resolution is 1024 x 720 - so the panel only has to scale in the horizontal. I've tried outputting 576p and let the panel do the scaling in both directions - but the Denon and Pio scalers appear to do a better job.
At the end of the day, it's down to what you visually prefer...
As a bonus, the DV-600 delivers DVD-Audio and SACD digitally over HDMI (1.2a) - you can lose those 6 phono leads for multichannel audio, if you have a compatible amp/receiver (the Onkyo 805 is my next purchase ). Only one cable to the panel - brilliant!