I must say that I have been rather impressed with the DAV series of all in one home theater packages. I have the big brother of the DAV-S500 (DAV-C700), and it sounds great. Granted these systems won't beat seperate component systems, but it is excelent for the price. The systems are great for small to meduim sized rooms. As for progressive scan out? No none of these systems support progressive scan yet. I am not too sure about the s500, but my C700 offers component video out, which is a great plus.
As far as Dolby Prologic 2 (analog 5.1 surround sound)? I wouldn't think that it matters much unless you own a Game Cube. Dolby Digital 5.1 and DTS are where it's at (especially DTS), and they are both supported. Also these players support the new multi channel SACD's which sound amazing.
Oh, and if you buy the system before 9/30/2002 you can get 5 free DVD's direct from Sony. Check it out
here(Crouching Tiger Hidden Dragon, 6th Day, Vertical Limit, Fools Rush In, and Random Hearts). They may not be great, but if you don't like em, then E-bay em.
Great deal!