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Wow, so many professional engineers and technicians around here.

I've been playing PS1/PS2 games mostly as of late. My 24" 1080p TV does a great job displaying those older games and dvds at 480i/p, and playing Xenogears at 720p on the PSTV doesn't look bad at all.

Really, I can only tell the difference between 720p/1080p if very close to the TV, or on the 42" and 55" TVs I have access to.... And sitting less than 3 feet away from a TV isn't very healthy.

Get a 32 1080p screen as you originally intended, they're affordable and get the job done. Although I bet 1080p looks great on a 44" or bigger if seating more than 3 feet away.