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1024 x 768 is odd because that's 4:3 resolution, not 16:9 which you'd expect for a widescreen hdtv (as far as I'm aware you cannot get 4:3 hdtvs).

In theory, 720p is best for games unless you've got a full HD TV (in which case you'd go 1080p). The main reasons being that progressive is better than interlaced for fast moving images, and unless you've got a full hd tv then the 1080 picture's gonna be scaled down to the 720 picture to display on the TV anyway.

I say in theory because some people will swear that 1080i is better for them, and who's to say it isn't.