Obligatory posting of "THE CHART" for any resolution discussion thread:

I'm staring at a 21" 1080p computer monitor right now.  There's a *very* noticeable difference between 720p and 1080p on it from where I'm sitting.....so size isn't the only thing to consider.

^^^That

Edit:  A basic rule of thumb when considering buying a 720p vs. 1080p TV is, are you going for 50" or larger, or less than 50"?

If you're going for a set smaller than 50", then a 720p set is fine, and alot cheaper too... most  42"-50" 720p plasmas can be purchased for under a grand, sometimes as low as $700 for some 42" models.  Most LCDs 42" and larger are usually 1080p anyway, though they are a bit pricier.  Basically its not worth spending the extra money on a 1080p set unless your going big, in which case most sets on the market these days 50" and larger are 1080p anyway.

Another general rule:  unless you have Blu-Ray or a PS3/360 to take advantage of 1080p, there's no point in getting a 1080p set since HDTV is broadcast in 720p/1080i anyway.

yeah, depending on size, a bump between 1080p and 720p is noticeable, small but noticeable. Now a the bump between 480p and 720p is enormous. My next TV will be 1080p, if that's any consololation.

If your TV displays 1080p, there's no reason not to let the 360 upscale to that resolution. I gather the upscaling is done in hardware, so there shouldn't be any framerate hit. As for the PS3 I heard it upscales partly in software, so it may be different. Try and compare.

I love the chart.  We're all assuming the OP will be sitting on the couch about 4-6 away from the television.  But yes, distance/size are both very relevant criteria when determining resolution types.