Having games rendered in 720p or higher and then having the projector downconvert to 480p works as a sort of anti-aliasing. Especially for games without AA of their own, you may notice that they look better because of the smoother lines.
Another consideration is that there could be problems with text. If you send text that is meant to be read on a 720p or higher resolution, it may be difficult to read at 480p. For those games, 480p might be better if they use different text based on resolution. I believe this is (was?) a problem with Dead Rising and Lost Planet.