You need to better define what you mean by "better."
If you mean better picture, feeding the "2" a 1080p file may either not work or result in some stuttering while it tries to dynamically downconvert it to what it can output. It's been a while- I can't remember how well the "2" can do the latter- if at all. What you might want to do is get one movie at both resolutions and watch busier (more action-oriented) scenes. My guess is that if the "2" can even attempt to play (by downcoverting) the 1080p version, you'll probably see some stuttering in high activity scenes.
If you mean better (= smoother) streaming experience, the 720p file will likely be considerably smaller than the 1080p version, so it will likely stream "better" than trying to download the bigger file all other things being equal.
If you mean better in terms of "I'm converting my blu ray collection" and wonder which format I should target, the "2" plays 720p. BUT, if you expect to replace that "2" someday, why not go ahead and render a 1080p version too and store the copy on a cheap external drive until you do replace that "2". Then you don't have to re-rip all your discs again.
If you mean better in terms of the technical aspect of making an m4v file, some would argue that the extra bits in a 1080p original might indeed yield a better 720p downconversion than converting a native 720p file. Personally, I have some doubts about that one.
Bottom line: the "2" outputs 720p be design. It's not really meant to work with 1080p files. So if the "2" is your long-term
TV box, feeding it 720p is feeding it files as good as it can play.
