The "glass" is the informal name for the entire imagine system, sans electronics such as video input, processing, etc. It is a term used when a company buys that entire component, wraps it with their electronics and physical packaging and sells it. So in that sense, it includes the front glass material but its meaning is well beyond that.
I think video processing in TV and AVRs has lost a lot of its value. You can now get DVD scaling in your blu-ray player so downstream devices don't need to have it. All that is left is de-interlacing of broadcast video which most devices do a good job on whether it is the TV or the AVR. There was a time when such processing was very expensive but no longer.
One use left these days is auto-calibration. While there have been much improvement, TVs still ship that don't comply with industry standards as far as color and grayscale. There are processors which can, using a meter measurement, preprocess video so that what is then sent to the TV results in a correct image. The cost is in $1,000 range though so easier to justify in higher-end gear than lower. BTW, the Panasonic VT-30 supposed to have the same support as far as auto-calibration but I heard it may not work yet.