+1 I echo his every point. sorry HobeSoundDarryl, but you'd be hard pressed to tell the difference between your 1080i (or p) source and 720p display thru ATV. just keeping it real.
I must be hard pressed then. It's night & day when I render video from the 1080HD Camcorder for max

TV settings and then compare that to just hooking the Camcorder to the 1080HDTV and watching the exact same footage.
Everyone at my house can easily see the difference too. That's why we have all been looking forward to a new

TV, hoping that more modern hardware would cover this base. Even though it wasn't announced, I'm still waiting for some definitive feedback about whether it can play something a little better than spec (the old one I own can).
But instead, I keep getting feedback like this from people who don't even know me telling me what I can and cannot see, why it makes no sense to wish for higher resolution video on a higher resolution big screen HD, and so on.
As stated multiple times before, what's it to you? Why do you care? If this Apple product does what you want it to do, why do you have to find such fault with someone wanting to know if it can do a little more? I don't subscribe to the idea that if it's good enough for me, it must be good enough for everyone else too. Why must people like you believe that?
Here's a bottom line: if it would work out that the thing could play 1080p, all the "720p is good enough" crowd would still get every bit of the exact same experience, the same files to rent, the same file sizes to store, the same picture quality, etc. You can't lose if the hardware is more capable than the software you find satisfactory. But it doesn't work the other way.