Well, the the truth is that 1920x1080p native display sets do have a potential advantage over 720p/768p screens, especially when you are talking about larger sizes (like 60" and above). And it depends on your viewing distance, of course. If you sit relatively close to even a smaller 1080p display, you will probably see some additional detail that might not be visible on a lower resolution display with good 1920x1080 HD source material. Still, at normal living room viewing distances (like 8 to 12 ft), it is impossible to see any resolution difference between a 42" 1280x720p display and a 42" 1920x1080p display (assuming all other PQ attributes like color, black level/contrast, etc. are basically equal).
Bottom line is... get the HD DVD player! You will be knocked out by the PQ.