I have a Samsung LN40B550 TV which is 1080p. This is hooked up to a Dish Network Vip722 sat receiver. It works fine but my question is...should I set the Dish box to output 720p or 1080i? I don't know if the tv itself scales everything to 1080p but I do see it say 1280x720 @60hz or 1920x1080i@60hz when I press the info button.

So the question is, which is a better option? 720p or 1080i?

The best option is the one that looks the best to you. You will get proponents of both 720p and 1080i.

Well, that is not a very good answer "one that looks best". In other threads I see people getting hard on someone's case for color calibration, but never did I see "go with what looks best" if what they were using was off. I just wanted a solid answer as to which is better for a 1080p set.

Better to scale to 1080p from 720p or better to deinterlace from 1080i to 1080p. If that's how it works which I'm not sure of.

I guess I need a better understanding of how a 1080p set displays a picture from a source that is not at native resolution.

I am using a VIP722 with a Samsung 30 1080P plasma and get fine results using the 1080i output setting. Some sets do 1080i to p better than others, but I am very satisfied with what I'm getting.