There's is absolutely NO WAY an upscale (atleast from my panasonic bd55) can be mistaken for Hidef (as suggested by some users in the Upscaler shootout thread a while back- to have a bluray vs upscaler shootout at a distance).
There were 2 shoot-outs:
1. Upscaler shoot-out as posted in the Oppo 983 thread (though it was not just upscaling but also de-interlacing)
2. Upscaled SD vs Hi-def video shoot-out, as posted in the SD vs BD thread
We tested 8 different upscalers in the first shoot-out, including a Panny BD30. I don't really know the upscaling capability of the BD55 but if its similar to the BD30, its not very good. Those that performed well were the Oppo 983, Oppo 980, the HD-XA2 and the PS3. After that shoot-out, some people said that the pq was similar to BD.
In the next shoot-out, however, we pitted an Oppo 980 and a Pio 696 passing thru a DVDO VP50Pro video processor (which is pretty much state-of-the art) vs. BD and Popcorn. There was definitely no contest between upscaled SD vs hi-def video, especially when you use a big screen (we used a 119" screen). Your screen is pretty big so you will be able to easily detect the differences at normal viewing distances. Everyone in the shoot-out rated the BD and Popcorn much higher than upscaled SD.
A good upscaler coupled with good material will definitely produce a very good picture, but it still can't compete with BD. You can see it in jaggies, edge enhancement, a generally softer picture, less shadow detail, etc.
I haven't actually seen the Onkyo 876 in action. In theory, its upscaling capability should be pretty good cuz of its HQV chip. In that case, an 876 and an Oppo 983 would be redundant.
Your alternative would be to get a cheaper Denon AVR (maybe 1909 or 2809) and an Oppo 983.