From what I gather, DVI seems to make the biggest difference with LCD, DLP, and Plasma, while component is just fine for RGB and Direct-View.
BTW, I use component for my LCD projector, and it looks pretty fuggin good. (My pj doesn't have a DVI input, unfortunately.) I have to use the DVI to my Direct-View HDTV, which looks looks excellent, as well. (There is that slight loss of detail in the dark areas of the image. But, the P266 updateappears to have brought the DVI image back up to P264 quality, which was worsened temporarily with P265.)