Thanks for purchasing two Samsung units. I can help explain these issues.
First of all, the television will display the signal coming in. Since your Home Theater system will upconvert inside of the player, it may not send the upconverted signal until you go into the menu and tell the Home Theater system that you want to upconvert it to, say, 720p or 1080i. It comes out of the box set at the lowest resolution on purpose. So you'll want to go to the menu in your HT-Z210 and change the output to a higher resolution. That should give you better picture quality as well. What you change that to, your menu bar on the television (you noted 60hz, 480p) should change to (60hz, 720 or 1080i) the higher input.
Let's address the 60hz part now. Yes, your television will display 120Hz, but that processing is done inside of the television. So you'll send that signal at 60Hz, and the TV will transfer it to 120Hz and display the 120Hz signal on the panel. However, that 60Hz denotes the input signal, not the displayed signal.
The 60Hz on the information bar is the signal it is receiving, and not what the panel is actually showing, and that is confusing. Rather, it is display what the input is from your HT-Z210, and that will be at 60Hz. It should be understood that the TV will then process that signal and display 120Hz.
I apologize for the confusion on that Information Bar, but it IS receiving 60Hz, and no matter what regardless of display, will process the signal and always show 120Hz.
As for the upconverting DVD player, DVDs are 480i or 480p. The HT-Z210 will actually add lines of resolution based on the 480 lines present, and then output that improved picture through the HDMI, where the television will process it again. It won't be Blu-Ray quality, but it will be converted to a high definition signal that allows the television to display a quality picture.
I hope that answers your questions. If it doesn't, please let me know and I'll be happy to explain further.
I recently bought a series 5 that was bundled with a home theater system (HTZ210). I hooked up the system to hdmi2 port and when I turned on the tv it showed 480p at 60hz (or something like that). Played DVDs and it looked great, but my question is this: why is it at 480p when the tv says its 1080p. is it because of the player? (though it says that "Full HD upscale"); do I need to get a blu-ray player to get 1080p? or is it because of the supplied hdmi cable? I saw something in the manual that says 1.3 hdmi? how would I know if the supplied cable is 1.3? would it make a difference? Hope you can help. Thanks