Converting from 1080i to 720p may actually decrease noise for re-encoding as quantizing errors increase at higher frequencies due to larger coefficients in the quantizing matrix. The higher horizontal frequencies in the 1080i are filtered out for scaling from 1920 to 1280 pixels. Vertical conversion involves de-interlacing so motion compensation can be compromised from the lower frame to frame correlation. DCT blocks are larger onscreen in 720p which could make the block boundries more apparent. However, from empirical observation and from theoretical advantages of encoding efficiencies for progressive formats with twice the frame rate, conversion to 720p does appear to allow better results at lower bitrates. It's still the lesser of two evils and still not pretty.
ABC and NBC are using MPEG 4 for network distribution using Ericsson (Tandberg) encoders with phase-align audio for 5.1, CBS continues to use MPEG 2 at 40 Mbs with Dolby E for 5.1 using Harris encoders and FOX is now using Motorola encoders for the splicer system. Using a ratio of around 2:1 for cascaded encoding minimizes loss of downstream encoding efficiency from added noise, so as stated sending a network at ATSC bitrates of 19 Mbs is insufficient unless the stream itself is turned around directly for broadcast. While the splicer system does allow for efficient MPEG 2 network distribution at lower bitrates, it's not as efficient as using MPEG 4.
There seems to be a growing movement towards 1080/50p and perhaps 1080/60p. With the increased encoding efficiency of progressive formats, the extra bandwidth to carry twice the pixels requires far less than twice the bitrate, in fact some have stated it is nearly the same. On a live event such as the SOTU, it would be ideal as there would be minimal loss with conversion to 1080i and 720p. The downside to using 1080p (and 720p on some cameras) as compared to 1080i on live cameras would be the 50% loss of light sensitivity (1 stop) from not using the sensor row pixel grouping in interlace mode. Maybe by then 4k live production will be on the horizon and 1080p would be a moot point. Dual link 3G or single 6G, that should be interesting.