I'm not going to claim that it is impossible under the current hardware configuration, but it is pretty unlikely that the Wii could support 720p ...
One thing I have seen suggested which is unrealistic but possible is that Nintendo may be able to overclock the CPU and GPU with a firmware update, and they may have a larger framebuffer built onto the Hollywood processor which currently hidden by the firmware of the system. This wouldn't be the first time a system could be overclocked with a patch, and many hardware manufacturers have released chips with disabled components on them (typically because those components were built in for redundancy); unless Nintendo was expecting to have to make the jump to HD, I couldn't see them building a system that was unnecessarily expensive on the off chance that they needed to use the extra components.
