A projector that can do 1080p at 120hz doesn't exist for under $30000 (may need to add more zeros), but the 1070/1080 can do both 1080p@60hz and 800p@120hz. I dont see myself wanting 5x 1080p, but having the option is nice.
Correct, up-conversion is bad, any processing is bad for gaming. As far as sharpness goes between 1080 and 720 it will only come down to how big your screens are. The bigger the screen size, the more you will notice the difference in sharpness.