Lets see: If you're sitting at normal TV distances then 720P would probably be better for a couple of reasons. Mainly though its because you probably couldn't discern the difference in pixel count between 1080/720P on such a small TV and the second being most games run at 720P so its best to run them at their native resolution, infact getting a 1080P set may actually be worse if gaming is a significant focus.
The reason why people have been talking about contrast ratios is likely due to the fact that games are often dark and good black reproduction is quite critical for some games, even to the point where some games are almost unplayable on a TV with poor black reproduction.
You don't need a TV that has 120hz, you could invest money in more important things than that as you're at the low end of the market already. The important point is that the image not ghost (good response) because in games you often have quite fast panning which is completely different to most movies. Also if you're sensitive to timing you may want to look at a set which has a low frame delay, you'll probably notice it most on fighting and music games especially where timing is essential.
I saw a pretty decent plasma for $598 on the site as well just FYI. http://www.walmart.com/catalog/product.do?product_id=8477432#ProductDetail
Tease.
