There really isn't any reason to not have your Z2 set to Auto.
I think I understand what's going on. You're confusing the PS3.
You set the PS3 up to believe that your display can accept anything up to 1080i, and it can as long as the Z2 is in AUTO.
Then you went and changed your Z2 from AUTO to, say, 720p - exclusively. So, it won't understand 1080i anymore. But your PS3 still thinks it does. (You see where I'm going with this?) When you see that it isn't working for a game then you start cycling through resolutions with the Z2. If you're plugged in with HDMI->DVI like I am, then good luck to you, sir. Everytime you change your display's resolution it sends a little message down the HDMI cable to the PS3, then the PS3 changes resolution to match, all the while you're still cycling (because it takes the Z2 a long weekend to lock onto a signal after a resolution change), and you're snowballing. If you're plugged in with component, then who knows what happens. But probably something similar.
XBOX Live / PSN: Choocheroo