Sure it can....and very well, but until we get a decent region free mod it will only do this so far on NTSC r0 (or r2 if you can find a NTSC r2 disk!) or on PhotoCD (fabulous picture of these if you show them in NTSC and progressive)....
Basically though progressive is currently not the most useful feature on this player, until we get region free (and hopefully a decent PAL progressive too).
Regards,
Ian Guinan