If you're going to hook up your DVD/CD player to your receiver via the digital output, then the internal DAC's (Digital - Analog Converter) on the DVD/CD will not be used. You'll get your direct PCM/Digital stream straight into the receiver as well. Assuming that you tv doesn't have component inputsd or even s-video, then you will be using the DVD's video DACs.
Therefore - don't go too pricey on the CD half of the player - unless you'd like to go SACD (which I havfe no experience with), because the digital stream from any cd player - whether it'a $50 or $1000 will sound identical - unless you use the cd player's internal DAC's, in which case the $1000 CDP will probably sound better. In re: the DVD player, since you're TV ain't that great, you won't need a super high end player. You're not going to get progressive output from it anyway.
Check out a bargain bin 5 disc DVD/CD player with some sort of digital audi output (optical or coaxial are both fine - just remember that you can hook the digital coaxial signal up with regular, well shielded analog RCA cables). The video section of the DVD player will probably just be a standard yellow RCA cable.
Don't spend a tremendous amount of money on this, though. In this case, the component will only need to be purely functional, as the work will really de done by your receiver.
If you're not thinking about upgrading any other parts of your system (TV being the most obvious part), then the solution above woudl be fine. If you are thinking abou upgrading to a new set, then consider getting a DVD player with progressive scan so that you don't have to run out and buy a new one along with your new TV. The difference in price really should be minimal.
