Can you tell? I mean, really? I bought Star Trek on regular DVD when it came out, then on Blu-Ray when I got a player. I have a 40" 1080 TV and couldn't tell the difference. I think the difference between 720 and 1080 is snobbery, unless you can tell on a bigger TV.
How far away do you sit to watch the movie? For 40" I would say you should be no further than 8 feet. Any further and you won't be able to tell. I sit 12 feet away from a 120" projector screen running 1080p. I watched a DVD on it recently and it was awful.