I watched a standard-Def DVD of Elf last night on my Pannie BD-35 and I have to say I think it was the best looking upscaling I've seen in my setup. I have an Oppo 981 and Toshiba HD-A2 HD-DVD player that I have been using before this Pannie.
It's tough for me to say without A/Bing, but while I was watching the movie I found myself thinking that there's no big reason to buy Blu-Ray over standard def DVDs unless it's a real epic or blockbuster!
The sad/funny thing is, I haven't set up the Panny at ALL yet... haven't even gone into the menu once because I was waiting to set up the new receiver and re-do my whole rack. It's probably upsampling to 1080P by default and my TV is only 720P... I have no idea!
