Upscaled images tend to look pretty awful if you're viewing them close up. I think that applies across a whole range of devices, connections and screens. If the Wii only outputs 480p then either use it on a SD screen or plan to sit further away (then screen size becomes an issue).
For instance my original xbox connected via s-video into my Dell 2007WFP looks awful at normal PC viewing distances (about a metre). The further you sit from it the better it looks, but the screen is just too small for that really. The same xbox connected to my 32" LCDTV again looks awful close up, but 6 foot away it looks fine, although still not quite as nice as on a SD screen.
So I don't think it's just that the component input on the 2407 is bad, it's just that a low res image, upscaled onto a high res display, viewed from too close, is always going to look bad.