Between an HD-DVR and an LCD HDTV such as your Sony Grand WEGA you probably wouldn't notice much of improvement in image quality if any.
If you're not using an HDMI or DVI-D interconnect between your video source and your display then you are using an analog YPbPr component video interconnect.
You're essentially correct that “YPbPr is for analog signals and YCbCr is for digital signals.” YPbPr and YCbCr are not “analog component inputs”; YCbCr is the COLOR SPACE FORMAT used for DIGITAL component video and YPbPr is the familiar color space counterpart for ANALOG component video. All digital video content on DVD-Videos, HD DVDs, and Blu-ray video discs is encoded as YCbCr component video.
Using an HDMI connection between a digital STB, DBS receiver, or DVD disc player, rather than analog YPbPr component connection, would indeed eliminate one digital-to-analog conversion step as well as “one less analog to digital conversion” step when using a digital display such as a high-definition LCD TV or monitor. Compliant HDMI connections should invariably provide an advantage when using digital displays even if masked by other equipment-related image quality shortcomings.
HDMI is currently positioned to become the preferred digital interconnect for consumer audio-video equipment though, as mentioned, compatibility issues do remain.
Aside from the issue of audio or video quality, using HDMI-HDCP compliant connections should mitigate potential problems that may arise in the near future when ICT enabled HD video content becomes more commonplace (ICT enabled HD video content is inevitable.)
The HDMI specification also provides for a Consumer Electronic Control (CEC) bus on CEC enabled equipment, which is intended to provide enhanced interoperability. This allows HDMI-CEC enabled A/V equipment to automatically communicate with each other across a compatible system. This provides the ability of “plug & play” auto-configuration with the potential to minimize the number of remote controls as well as the overall number of key-presses required to execute various control functions. (The downside is that the HDMI “plug & play” auto-configuration may not always provide the best possible equipment configuration. This is more an issue of a manufacturer’s implementation of HDMI-CEC than a shortcoming of the HDMI specification itself.)
The enhanced audio and video features supported by the use of HDMI 1.3a compatible A/V equipment are as follows:
• Preserve the full, unaltered transmission of the new lossless Dolby® TrueHD and DTS-HD Master Audio™ compressed digital surround sound formats between compatible A/V receivers, A/V pre-amplifier/amplifier combos, or A/V control centers and compatible A/V sources. (Note: Onkyo has just released a couple of new A/V receivers* that support HDMI 1.3a, Dolby® TrueHD and DTS-HD Master Audio™ decoding);
• Lip Sync - automatic audio/video syncing capability (helpful whenever a large quantity of video processing occurs in 1.3a compliant A/V equipment);
• Deep Color™ - 30-bit, 36-bit and 48-bit (RGB or YCbCr) color depths; a larger color palette eliminates on-screen color banding for smoother transitions between colors;
• Extended color gamut (IEC 61966-2-4 color standard) "xvYCC" support. ("xvYCC" is an abbreviation for extended-gamut YCC color space for video applications.)
Though not a 100% guarantee the best assurance of HDMI compatibility, along with the potential to offer the highest quality of audio and video performance, is to purchase A/V hardware that is certified as SimplayHD, SimplayHDT, or is certified by a third-party HDMI Authorized Testing Center (ATC) as fully compliant with the HDMI specifications.