I'm wondering about this, too.
For 720p displays, whether or not "up to 1080i" will look better all depends on the quality of your projector's (or panel's) onboard scaler.
If you feed your 720p display a 720p signal from the A2, you're letting the A2 downscale the 1080p HD-DVD image to 720p, and the display is then just displaying it (ideally, it's displaying it pixel-for-pixel).
If you feed the same display 1080i from the A2, then your display's processor is doing the deinterlacing and downscaling to 720p. Whether or not this looks better depends on which processor does a better job of the downscaling task.
Which leads me to this question. For those of us with 720p displays (I'm using the Sharp XV-Z12000 MKII)...would it maybe be worth the extra $200 to move up to the Toshiba HD-XA2 to take advantage of the Reon chip? It would seem ideal to have the Reon in the XA2 do the downscaling to 720p and simply pass it to the display, which then just displays it pixel-for-pixel. But would it be a big enough difference to make it worth the upgrade?
I suppose that, too depends on how good your display's internal scaler is and whether you should just use that with 1080i from the A2.
But my real question is, how good is the A2 scaler, period? How good is the A2 scaler compared to the Reon in the XA2? Is it night and day? Does the XA2 really trounce the A2 in how well it scales? Or is it kind of a minor difference and not in itself worth the $200 extra for those of us who really want good, clean 720p (and have no use for it's ability to output 1080p)?
Anyone?