Considering the price he paid and the time he bought it, most likely it's using the Silicon Optix Reon chip for video processing. It's a somewhat "scaled down", non-upgradeable by firmware version of the Realta processor. There's a Reon inside my Toshiba XA2 and the PQ results are quite nice when upscaling DVDs. I thought about going the receiver route for processing but you're locked into a generally non-upgradeable route with a very general purpose deinterlacing/scaling solution. Also the options for tweaking the image are very limited on the receivers vs. stand alone video processors. Having a separate modular unit in which you can choose a device for specific functions most important to you was the way I wanted to go.
The Reon will lag more, but it wasn't designed with gamers in mind. It was geared for picture quality for tv, movies, etc. Also if it doesn't already have a "game mode" to reduce processing and shorten the lag, it cannot be upgraded via firmware to add a mode. Should be fine though for "casual gaming", but a problem if you're a hardcore fighting game guy who needs to precisely time frames for combos or a shmup fan.
.