Upscaling shouldn't be a huge problem, I mean I have this running on an AMD E-350 without any problems.
The thing is - if you want to do this for different resolutions, you would need to find those "uneven" resolutions to make it work for every "possible" resolution. If you want to do this - you're welcome Upscaling to 720 is absolutly no problem on my system which of course has only small CPU power. And - upscaling should not create bad quality videos - if my TV is upscaling or mencoder shouldn't make any difference, should it?
Downscaling from 1080 to 720 might be an issue of course but I have no 1080 video so not much I could test here.
"-aspect 4:3" which is recommended and used so often (and I used it too in the past) can not be suggested as it cuts quite a lot of pixels away on the left and right side of the video. And videos with an aspect of already 4:3 get stretched to the complete screen.... Believe my I tried to find a solution that works for all aspects for more than 12 hours and this is what really works for every aspect without croping, stretching or other not acceptable problems.