The recommendation of a scaler was a two birds with one stone thing. It would 1. get you more HDMI ports, and 2. improve the video quality. The Denon only has a slightly better scaling ability than the Pioneer. I don't know if it's also limited to analog sources, but the specs page on Denon's site seems to indicate that.
The scaler won't do anything for 1080p sources (well, more expensive ones can do gamma/gray scale correction, but not the two I mentioned). But for anything less, 1080i/720p/480, they offer an improvement. I don't like overscan (when a display pushes the edge of the picture off the screen); while it might have been needed in analog days, there is actual picture content out there now, and it's being hidden. Only in 1080 mode can Pioneer's displays go into Dot-by-Dot (no overscan) mode. Many games, on the PS3 are only 720p, and bonus content on BDs is often 480p. Having a scaler will improve those things. A lot of television is 1080i, so having a superior de-interlacer can improve things there too.
A scaler isn't a necessary item, but it does offer some improvements. Just depends if you think it's worth the money.
