Outboard processor or receiver as processor only?

I'm refinishing my family room and now that it's nearing completion, I'm finally getting to seriously contemplate how I'd like to finish the re-build of my old pro logic HT system into a high def system.

I forsee three high def sources: high def tivo/sat receiver, high def dvd, and a high def game machine for the kids. The TV will be a 1080p large screen, to be purchased probably in the fall as 1080p comes down in the LCD/plasma platforms.

The biggest conumdrum I have is what to do in the processor department.

Where high end audio is concerned, I'm a big believer in getting more for less in the pre-owned world, but I'm wondering if I can get away with it with the processing. BTW, this will be a HT-only system -- I have a completely separate 2-channel system in my living room.

The amplification and speakers are done. I'm using 5 200w B&K monoblocks to drive 5 NHT VS-2s. The VS-2 was my old center channel before I broke my system into two systems (as above) and I liked the VS-2 so much I decided to stick with the VS-2 all the way around in the HT system. I still need to get a sub, but that will be an easier decision -- $1k should get me all the pre-owned sub I need.

What worries me in the processing deparment is the HDMI aspect. It'd be a lot cleaner to use a processor/receiver with 3 HDMI inputs and at least one HDMI output. But doing that, at least where a processor is concerned, sounds like big bucks (as it'd have to be a newer (probably new) processor, as opposed to a Lexicon DC-1, say. In this scenario, how much of a processor performance hit would I take with a mid-fi receiver-as-processor-only with the amplification farmed out to the B&Ks?

Could I find a sub-$1k outboard processor that would give me my multiple hdmi inputs? That's the rub, I want to stay under $1k in a processor, but of all the components in a HT system, this is the area that changes the most each year.

Put me on the right track.
If you want the best picture then get a display that has all the inputs you need, running video into a Pro at your price point will degrade the signal period. Run all video straight into your new display and use the Pro for audio only, Rotel would be great at your price. Rotel has excellent bass options and all the needed adjustments. You can get RSP 1066 for around $700 and the RSP 1068 for around $1000 both are very good for the money.
Why not use a separate HDMI switcher and then use any pre/pro you like?

Gefen amoung others make IR controlled switchers for a couple hundred bucks (3:1 ~$250). You get the HDMI switching you need, and could get a better older pre/pro though I would skip the DC-1. Too harsh!
Thanks for your replies. In response to both, essentially, would an HDMI switcher degrade the video signal? If I did take that approach (or even the shotgun-to-the-display approach), is there a running short list that most would agree on in used pre/pro's for ~$1k (preferably less). Again, though the two really go hand-in-hand, music isn't paramount in this HT system.
It is always best to take the shortest most direct path with any audio or video connection, if you get a video switcher if it isnt of very high quality your picture will no doubt suffer.