Firstly the iScan isn't upscaling the image, it just de-interlaces the incoming interlaced signal, it does have some benefits such as it gets rid of the CUE issue which can be annoying on sky especially on a PJ.
One thing you have to realise when using a PJ (or plasma) is that any signal you feed in Sky, DVD etc... will be de-interlaced (unless your DVD player is outputting progressive scan) and then scaled by the PJ to its native resolution. The reason for going down the route of an external video processor is that the processing will be of a better quality and so will give better results.
You cant make standard definition material into hidef material, if the information isnt there you cant add it, upscaling creates extra lines from the information already there, this can help make the picture look better but it wil never look hidef, also 1080 isnt the be all and end all, the best picture maybe with a 1080 input or it might be something lower such as the native resolution of the PJ, 960x540 I think in the case of the AE300.
If you want to try a scaler then maybe a second hand Lumagen Vision might be available for around £600 and this would do everything you would need.
Ryan