I've been playing around with that for a bit these days.
As VOS said, with native on, the signal will go to your AVR or TV as it is sent to the DVR from Direct. Some AVRs and some TVs do an excellent job of conversion, but not all.
I found that for my new Denon AVR-2113ci, that the Denon is much better at de-interlacing and upscaling the video than anything else in the video chain. It even makes the horrid SD look much better.
But the cost to do that is switching time. With native on, HDMI switching is a much slower process. I don't find that irritating, others do.