That's right. The TV will always scale the incoming signal to its own native resolution in order to display the image.
Your LCD panel has a native resolution of 1366 x 768. Any incoming signal will always be scaled by the TV's internal processor, as long as the internal processor supports the incoming signal's resolution.
Your TV's internal processor supports incoming signals with resolutions of 480i, 576i, 480p, 576p, 1080i, 720p, and 1080p. The TV will process any of those signals by scaling any of them to the panel's native resolution of 1366 x 768.
If your TV is fed an upscaled 720p signal from a DVD player, the TV will still have to process it to 1366 x 768, the exact native resolution of the panel.
The same is true for TVs with native resolutions of 1920 x 1080. Any incoming signal other than 1920 x 1080 will be converted by the internal scaler to the panel's native resolution of 1920 x 1080.
Therefore, an upscaling player is not necessary if the objective is simply to display the image from the DVD source.
========================================================
Which setup will produce the better picture: (a) a pure 480i source processed to 768p by the TV, or (b) a 480i source, upscaled to 720p by the player, then further processed to 768p by the TV?
Results vary, so you will have to conduct an actual test and observe for yourself.
If the player's scaler performs better than the TV's internal scaler, then an upscaling player will help the TV produce a better picture.
