the upscaler in the aTV is pretty good, I'd leave the aTV at 4k SDR.
if you put it at 1080, you won't be able to get 4K content from netflix/amazon/iTunes. And your TV is doing the upscale from 1080 to 4k
if you play 720, the aTV does 720->1080, and the TV does 1080->4k
but if your aTV is 4k output , then the aTV does 720->4k, so it's only processed once.
If you have the aTV set to HDR and "match dynamic range", every time you play SDR, it will change the output from HDR to SDR.
at least on my LG OLED, the "flicker/drop out" is fairly pronounced when changing HDR/SDR.
since most of my stuff is SDR, I encounter that drop out much less by having the aTV default to SDR
the dropout when changing framerate isn't too bad, and it makes things look much better
although the screen saver tends to not be so smooth when it kicks in during paused video, since the frame rate is wrong.
when playing SDR media with HDR output on the ATV, I find the results less than good, so i don't do that.