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Yes, it will scale composite and s-video signals to 800x600 the and from your description, ar3.1 should take that as a full screen image (I can't find specs on anything but the 3.1-AV which has all kinds of inputs). Not sure of the quality you're going to get with a 31" screen but I would expect an S-Video feed to look fine.
You won't be able to take advantage of high definition material or Progressive scan DVD players, however. For that, you'd need to step up to the avt-3700 or something similar. Or you could get a high-def set top box that has RGB output (I belive there's an RCA mdel that does that).
Good luck,
adam
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