What is the best way to add video processing?

I have a Krell 7.1 HTS and wish to keep for now. I want to add video processing and HDMI switching. I have a Samsung LCD and a Panasonic AE-3000U and wish to run WII, X-Box 360 and DVDs/Blue Rays through a processor to either of the displays (LCD on wall and projector screen comes down from ceiling) and allow sound to come through the Krell. So it has to have 2 outputs. What are my best options? Also, want to keep price as reasonable as possible. The screen is 16:9 so getting rid of the bars would be a plus.
Check out the DVDO DV50 Pro. They can be had for @1800$ as factory rebuilt units. They list for 3500$ or so. About the best out there without going to the Lumigen which is a couple of thousand more. I got mine through Advanced Lamps. The VP50 may also fit you needs. Under a thousand. You may find other prices by googleing DVDO . Hope this helps!

The simplest and cheapest way to do this is add a HDMI
switcher. Mono price carries some nice ones and they back up
their products with great customer service.

The processing part would be a breeze using a HTPC for your
DVD and Bluray playback. There's a plethora of free ware
that would allow you to do post processing. Media player
classic home cinema and GOM player both come to mind. You
have some that can be bought like Cyberlink power DVD for
Blu ray.

MPC-HC will allow you enough video processing to make your
head spin...and it works well!

I use it or the video card settings to rid myself of the
black bars from time to time.