Nope, 1280 x 1080i (1088i) is sometimes referred to as "HD lite" but it's a valid resolution and can look great.
I'm no expert but I've read some gurus say that after a certain point the bitrate and encoding quality become more important than the resolution used. Lots of 1080i broadcasts really suffer from macroblocking in some scenes due to being bitrate starved. Worse than the DVD in some worst case scenes.
Some of MS's HD gurus sounded off on this once. Mmmm, it was something along the lines of that due to the quality of a lot of the source material diminishing returns start kicking in at 1280 x 1080i and after 1440 x 1080i most (older, film) sources offer little remaining quality to be gained by going higher. Lot of caveats to that naturally and a lot depends on the quality of the film that was used. I also imagine that the potential for todays films is much greater due to advances in film stock and digital cameras.
I think the bottom number (vertical lines of resolution?), 1080i, is supposed to be the more important one, to IQ, when encoding. I've read that the same applies to DVD's.
As to the 1080i vs. 1088i numbers, I think the bottom eight lines correspond to the overscanning of analog TV's. You see it as a grey bar on your desktop display when using some, but not all, software players.
I've read that the broadcaster can eliminate those lines from the flags if they choose to do so.
I'm no expert so take your grain of salt.