Nick,
The computer might be better at "upscaling" because of some native resolution issues. In short, if your dvd player/HTPC doesn't upscale the image to the native resolution of your TV/projector, then the display device has to do this.
This upscaling is done with some sophisticated math. Older TVs and older DVD players aren't as efficient as doing the algorithms, etc. In addition, your TV is busy doing other things, like displaying the image - In short, the closer the signal going into the device is in relation to the TVs natiev resolution, the less work the TV has to do to show the iamge on its screen.
One of the things that a TV has to do is convert or scale the image based on the number of pixels. So, a TV with 766 lines of vertical resolution that gets a 720p signal still needs to convert those 720 lines into 766 lines. Granted this is easier than converting 480i lines, but soem processing still needs to be done.
While this doesn't answer your question directly, from what I understand, an HTPC can be told what resolution to send to the monitor. Therefore, it can send a 766 x 1260 or 960, whatever, signal to the TV, leaving the monitor only having to deal with displaying the picture.
The short answer to your question is that the DVD player's math might not be as good as a CPU's and it might not be as fliexible as the CPU's. On the other hand, it might be better. There is not set in stone rule that either is better - but one migh be better than another, as all upconverting is not equal.
Granted, I don'd know that much about this stuff - still learning. Please feel free, anybody, to jump in and correct me. I'm not offended by being corrected - only offended when I give somebody incorrect information without being told so.
In addition, I'm sure that Bren go a better, simpler and funnier answer than I.
