Helping the parents home theater...

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My aged parents have upgraded in recent years to decent equipment. However, they want to get a blu-ray player now. There is a problem I think though. Their Plasma TV is not a 1080p. So, I don't know that blu-ray will be compatible? I don't know how the whole 1080p thing works through movies.

Here's the setup:
1080i / 720(?)p Maxent Plasma TV from Bestbuy
HD Receiver from DISH (I'm jealous I can't afford one on military pay!)
Samsung 1000W 5.1-Ch. Home Theater System/Upconvert DVD/CD

One further complication even if this is compatible is the audio portion. The Samsung would have to be replaced with a new system. Any ideas of a cheap, yet decent, Home Theater Receiver that can handle multiple digital audios in and out? Their HD DISH Receiver has an optical out that they use.

Again, they are old and retired and I want to set them up in the cheapest way. Feel free to advise on blueray players.

Thanks so much!!!