Ummm, not exactly. Your thinking is correct in that you can use a single HDMI cable to your tv from the receiver and have several different kinds of inputs such as HDMI (both audio and video) --- S-video, component, DVI or composite for video --- RCA, digital coax or fiber optic for audio. All depends on what source device outputs you have and what inputs the receiver has.
Upconversion, simply put, increases video resolution to 1080i. Have an older DVD but also have a 720P or 1080P HDTV? The receiver will scale the video image up to the size of your TV.
Hope that helps you out.