I had a question on the DVD forum regarding this functionality. The answers lead me to believe that these's no point in outputting at 720 or 1080 unless the DVD's I own can output at this level.
Now, as far as I'm aware there is no current DVD media outputting at this level, so what's the point in having the functionality. i assume once Hi-Def DVD's com into play we'll all need new players to play them anyway.
The theory is a display with a native resolution of x by 720 or x by 1080 will display the signal without any further processing hence giving superior pq. However if the native resolution does not equal the recognised high definition resolutions, then just output at normal resolution and let the display scale the signal once. However you have choices, and can experiment with various combinations. Ultimately your preferences are what matters,not what someone may say in theory.
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Denon DVD-3910, Denon DVR-3805, Hitachi 32pd5200, 3x Castle Compact LCR's 2x Castle surrounds, Compact Sub Denon DVD2900, Benchmark DAC1, Cambridge Audio 840A, ProAc Response 1SC
My personal opinions are not those of the AV Forums or any other related website.