I know it does not do progressive scan but does the component lead allow you to view DVD's aswell as play the games.
Yup, works fine with both games and DVDs. And it will do progressive scan, if you have a US Xbox or a chipped UK one set to NTSC video mode.
It outputs progressive scan with games but not DVD. I think there is a hack somewhere for this, but not sure. I have a US XBox connected via component with progressive out to my plasma and it looks great.
The difference is not huge as my Panasonic plasma has a highly regarded deinterlacer of its own, so when you feed an interlaced signal the plasma does a good job of the conversion anyway. But, if you're asking is there a big difference between interlaced and prog scan then my answer would be yes, there is a major difference (especially on larger screens where interlaced line structure would be more evident).