I'm also shopping for a new HDTV... and with pretty much the same requirements as you do (just a slightly higher budget and a little more priority on 3D capability).
Since 3D isn't a big issue for you, you might consider checking out these non-3D TVs...
Panasonic TC-P60S60 - Plasma TV without the input lag issues the ST60 series has, but has only 2 HDMI ports. Amazon currently has it for $999.99.
Panasonic TC-L58E60 - LED TV with 3 HDMI ports. Amazon also has it for $999.99.
Regarding the Vizio that's been recommended...
I believe that you are correct... that the panel is 120Hz with the software bumping it up to 240Hz. I don't know 100%, but it seems like everywhere I've seen the refresh rate listed, it's always worded as "240Hz effective refresh rate". The inclusion of "effective" seems to indicate that it's not truly 240Hz. I think the TVs with true 240Hz panels are much more expensive (like the Samsung F8000 series).
BTW, I'm also looking at that one. There are two issues that is making my decision tougher though...
1. Issues with the remote. I've had friends who had problems with the remote for their Vizio TV (original one stopped working as well as the replacement they got from Vizio), and it sounds like the one with this particular model is troublesome too. I guess it's not designed very well and also stops working. Granted, if you're going to use a Harmony remote, it may not be a big issue.
2. No external buttons on TV. This issue in conjunction with the first issue would make using the TV a real problem (again if you're not using a Harmony).
I do have a Harmony remote, which I use with my current setup, but I still do find myself sometimes using the TV remote.
FWIW, I believe the Vizio is currently priced on Amazon a little bit above your budget. You can find it for under $1000 at Sam's Club, but my guess is that if you wait a little longer, you'll see the prices drop on all TVs as we get closer to the holiday season.
Good luck and please keep us updated on what you decide on.