the other thing I read on Gaf was a 1080p TV owner playing Resistance said that the game auto defaults to 720p on his set (even with XMB set to 1080p default) since that is the game's default resolution.
does this meant then that the 720p and 1080i games will not be upscaled in the PS3 to 1080p? Wouldn't the TV upscale it in that case?
http://www.neogaf.com/forum/showpost.php?p=4858836&postcount=101
Yes. If your TV is 1080p and you feed it 720p material, the TV's scaler will do the job of scaling the signal to the native resolution, so really there is no real need for PS3 (or X360) to have to upscale 720p games to 1080p, except for obvious marketing reasons.