The DVD Player will play back DVDs full screen on an HD display, but I'm not aware of any upscaling officially. I know that DVD played via my mini to my 1080 HD TV look dandy, just about as good as from my Blu-ray with it's known upconversion capabilities. That brings us to your next question...
Speculation is against the
Terms of Use so nobody here can really answer that. The only really official word ever from Apple about Blu-ray support I'm aware of is what's noted in
this article. Make your own assumptions from there.
That said, at this point I wouldn't let the status of Blu-ray support stop you from getting a mini as a good media center option. The breadth of media capabilities and experiences available from the mini as a media center far outweigh the current lack of one media format. The incredibly rich ecosystem of accessories and software enable so many things it's an exceptional device for a media center.
