You don't set the resolution to 1280x720 to play 720p material and let the HDTV upconvert. Big no-no for LCDs.
Why is that? I've always thought it's pointless to up convert 720p content to 1080i then down-convert to 768p. That's 2 scaling steps that can cause artifacts. I also trust the scaler in my $1000+ LCD to do a better job than any $100 DVD/media player. 1080 content on the other hand would benefit from setting source unit to 1080i for the same reasons.
As for the WDTV it's been running fine, however I've run into a couple of my movie ISO files that skip, no matter what firmware, even different units, (I bought 2), skip at the same places so it's the files. They play perfect on my XBMC xboxes and computer though.
Also the lack of custom thumbnails for files on NAS storage really sucks, I'm so spoiled with XBMC and it's automatic IMDB movie info/thumbnail scraper.
Epson EX71, Tosh HD-A2, Denon AVR590, Athena P4100, Infinity P362,C250,P162. RCA L42WD22, Pio VSX1016, Athena LS50