If you have to go LCD then go 720p max. Stuff won't look as bad. I don't know about where you live, but here in Seattle we have something called craigslist, and it has a free section and people are GIVING away TV's all the time. Finding a decent big CRT that can handle 480p via component isn't that hard. Cost you some time for calling around and gas to go pick it up. Everyone wants to get rid of their old TV's because they got new HDTV's. And for the record, CRT's can handle Lightguns, LCD can NOT.
I am in the same situation as of now. Looking to either get a big bad ass CRT or the Framemeister. Not sure which direction I want to go. Framemeister would probably be better in the long run for future TV's, but then there is the cost. Especially easy here in Southern California. I see CRT's on the sidewalk next to the trash, sometimes functional. I just grab em for friends or for myself (if it is decent). My treasured Toshiba I am using now was another mans trash. It's funny you mention HDTV's as a cause for people getting rid of old TV's, I never made that connection somehow (Maybe cuz I keep most of my stuff). As more people can afford them now, maybe that explains why I see CRT's litter the streets. (Okay, well not that much!)
If you can't use a CRT for logistic reasons (e.g. moving a lot and it's huge/heavy), some old plasma 720p are actually pretty good at upscaling and deinterlacing decently, plus they heat the room. No framemeister-quality here, but no "We wanted to make 1080p DEL affordable in 2008 so we cheaped out on electronics" as some newer models get. They can be get a thrift stores (often tried on-place) and come quite cheap now that 1080p 50" DEL TVs are 700$. I own an old (2005 maybe?) samsung one and it upscales saturn fine, even 10players bomberman!