SpartanGrad is right, turn off the A/V receiver and turn up your TV speakers, it should work on all TV's....except those where the video input to the TV is the only connection from the cable box and it's by way of the receiver, if you have that kind of setup you will need the receiver on to get the sound. Your TV should have a coax connector on the back, hook up a coax from the cable box to the TV set it to 3-4 ch as needed and use that to bypass the receiver.
As far as turning the Yamaha off and watching a signal plugged into one of it's inputs, no. I haven't seen this as a feature. When the Yamaha is turned off there is no video output. The unit has no way of knowing which input you want routed to the monitor. It does, however, have an ECO mode that reduces the power consumption. I don't think you will find any switching HDMI receiver that has a passthrough as you suggest because there is no way to know which input to switch to the output. Others have stated that you can route a signal through the Yamaha when it is turned off but I haven't seen this feature. You can read through the user manual and see if I've missed something here http://download.yamaha.com/api/asset/file/?language=en&site=au.yamaha.com&asset_id=54045
As far as upscaling etc., others are correct, this is a basic unit. Why would you need upscaling anyway? However, for what you get it's a very decent entry level Home Theater receiver. Plenty of power and enough control over audio to make a great HT setup.
My TV speakers work with the Yamaha off if I choose that option through my TV options menu. Thus, it depends on the options your TV has. However, I must point out that I never use that feature; I leave the Yamaha on not only to use the far better speakers/sound of my AV system, but also to have the option of using my headphones.