While converting all sources to HDMI is great, you can get the same effect with very little trouble either using the macros on the remote (I'm assuming, but not sure, that the remote that comes with it will do macros), or with a Harmony remote. If you have a Harmony remote the thing pretty much sets itself up. Macros are a pain in the ass to set up, but it'll just take 30 minutes or so and then you'll be set for good.
Anyway, all it means is that you'll have an HDMI and a component cable running to your TV (it will convert composite and s-video to component). Component cables can run all the same resolutions as HDMI and, while native HD content delivered over HDMI might look better than when delivered over component, that's not going to apply to stuff that's been converted from a lesser source. If your PS1 is connected to your receiver via S-video cables, is not going to look any better if it makes it's way to the TV via HDMI than component.
So, all you have to do is set up a Macro, so that when you push the button on your remote that switches the receiver to the inputs the PS2 is on, it ALSO simultaneously switches your TV to component. And when you press the button that switches to your DVD player or PS3 it simultaneously switches your TV back to HDMI. The only thing insult is the mere fact that you have two cables runningbetwen the receiver and TV instead of one. Big effing deal, right?