DNR is dynamic noise reduction it just removes noise from a signal. About 1080p, by nature all digital TV's are progressive and will convert a signal as such be it interlaced or progressive. 1080i 1080p really makes a minor difference in most size displays as it's the SAME resolution. The biggest difference you'll notice is in computer generated items like the PS3 or 360 which can actually produce 60 frames per seconds. DVD's and Blu-rays only use 24 Frames per second well under 60 and under 30 even. The tv actually adjusts itself in some cases to use 24 Frames in a second to match the film or it doubles and even triples some frames to produce 60. Personally the closer you can get to the source the better the image will look. If it's source is native at 720 with 24 frames if you can manage that on your TV it will look better, unless the device/tv have good scaling functions.
