I think Nintendo put the 480p limit on the Wii specifically to discourage the kind of pissing contest that HD can become.
Sure, lots of games could do 720p and not take a hit because they wouldn't be pushing the hardware too much in 480p, but then suppose another game comes along and wants to go all out and do all sort of stuff and so it wants to use 480p to concentrate on those other aspects -- only now everyone's saying OMGWTF 480P SUX GIVE US HD GRAFX! even though the second developer might have much better visuals by doing all those other things instead of 720p.
(Keep in mind that I have NO actual experience or technical knowledge on this particular subject, but this seems reasonable to me. Corrections are welcome.)
Short version:
1. Nintendo's going to stick to its guns on this one.
2. Good for them.
[edit: oops, the thread was a bit cold, and not the one I had meant to post in. Oh well. Not like it was 10 months old amirite?]