Actually, many of us have LCD flat panels that are either 720p native, or they're some weird "in-between" resolution -- my Sharp Aquos has 768 scanlines, for example. Looks great displaying 1080i content and 720p from OTA antenna. When I download HD movie and game trailers on my PS3, I typically download them in 720p, because the quality difference between 720p and 1080i/p on my display isn't so great (but the difference between 480i/p and 720p is pretty obvious).
I should also note that 1080p isn't a broadcast standard -- it was only ever meant for pre-recorded media (i.e., next-generation high def DVD discs).
There are many cases where 1080i looks inferior to 720p -- this is why ESPN and the Fox TV network only broadcast in 720p. 1080i looks bad for scenes with lots of motion in them -- action movies, car races, athletic events, etc.
Personally, if I am going to be downloading HD content online as a movie rental, I would prefer progressive over interlaced, so 1080i is a no-go for downloaded content. That leaves 720p and 1080p. And the bitrate for 1080p is double that of 1080i for the same frame rate; considering how 1080i has a higher bitrate than 720p, imagine how much longer it would take to download a 1080p movie versus a 720p movie? There are significant costs associated with serving up lots of rich high-def media, and they have to do with bandwidth. So 720p is a good compromise, and is still considered high definition.
Well said. This has been the most intelligent post so far. I have the ability to choose between 720p and 1080i on my HDTV and find that 720p is better for most things I watch; sports, action. Discovery HD Theater looks incredible at 720p, too!
I am very excited for the ATV update. I have been using it mainly for music and photos without much movies, so this will be PERFECT!!!! Yay Apple!!!