Should I set it in 1080p irregardless of disc?
dvd are encoded in 480i, thats why the first big leap in pq was when dvd players featured the progressive scan which made the 480 interlaced (i) disc to 480 progressive (p), does improving quality. now with the advent of dvd upscalers through hdmi connection, in theory, this same 480i disc can now be upscaled to roughly any resolution you want (480p, 576i or p, 720p, 1080i or p) provided your tv/panel/screen and upscaler supports the resolution.
with the dv 600, you can upscale to 1080p (just set it on the settings page). but based on my research here its way better to set it to the resolution that is closest to your tv/panel/screen's native resolution. so even though my lcd supports 1080p, i set my player to 720p since its native resolution is 768. this stops the tv/panel/screen's internal scaler from having to downscale the dvd upscaler's 1080p picture to the tv/panel/screen's native resolution.
so in my experience, going directly to 720p looks cleaner than setting it at 1080p. but, if you have a full hd panel. then go ahead and set it to 1080p and enjoy your old dvds like never before.