To add to the confusion...
I have a 720 Panny Plasma that has a 1080i signal coming into it - it handles it just fine (it's going through a *gasp* Sony receiver first but it doesn't upscale or try to downscale).
I don't know about your receiver, but I also have a Yamaha RX-V1800 (different room, different TV). It will upscale to 1080 as long as the signal isn't coming in on HDMI. If it is, it just passes it through to the TV via HDMI. This sounds OK but if you have a 1080 TV and you're sending video through the Yamaha at 720 via HDMI it will pass the 720 through to the TV. If you don't use HDMI the Yamaha will upscale the 720 to 1080. Then again, your 1080 HDTV may upscale the signal.
OK, i need some aspirin.
Joe
If you can't have fun doing it, it's probably not worth doing.