I think we could put this 1080 720 thing to rest, here is the latest test!
"We spend a lot of time looking at a variety of source material on a variety of TVs in our video lab here at CNET's offices in New York. When I wrote my original article two years ago, many 1080p TVs weren't as sharp as they claimed to be on paper. By that, I mean a lot of older 1080p sets couldn't necessarily display all 2 million-plus pixels in the real world--technically, speaking, they couldn't "resolve" every line of a 1080i or 1080p test pattern.
That's changed in the last couple of years. Most 1080p sets are now capable of fully resolving 1080i and 1080p material. But that hasn't altered our views about 1080p TVs. We still believe that when you're dealing with TVs 50 inches and smaller, the added resolution has only a very minor impact on picture quality. On a regular basis in our HDTV reviews, we put 720p (or 768p) sets next to 1080p sets, then feed them both the same source material, whether it's 1080i or 1080p, from the highest-quality Blu-ray and HD DVD players. We typically watch both sets for a while, with eyes darting back and forth between the two, looking for differences in the most-detailed sections, such as hair, textures of fabric, and grassy plains. Bottom line: It's almost always very difficult to see any difference--especially from farther than 8 feet away on a 50-inch TV."
http://reviews.cnet.com/4520-6449_7-6810011-1.html
On a set 42 inches and under, you can safely say you threw your money away, 720 sets are supposed to show better PQ for SD as well.