Not 100% sure, but I believe that model is a 1920x1080 panel. Its not 100% but typically I prefer to let the tv do the scaling, as I also have two 1080 displays in my house and have my dvrs set to native on and both 720 and 1080 selected, but as others have stated its really what each individual prefers. But if you are watching a channel that is broadcast in 720p, if you have both the above settings, some will be in 720 and other will be in 1080. ABC and FOX are 720, CBS, and NBC are 1080, all ESPN stations are all 720 I think, its probably about 75% 1080/25% 720 station mix if I had to take a guess.
I have my HR24s set the same way. With the AVR I have now, the 1080i/p is just passed through, but the 720p is massaged by the AVR's video circuitry. After testing thoroughly my AVR does a much better job of massaging than does the TV I have.
And SD looks amazing this way. Surely not HD by any stretch, but much, much better than any other way I've tried.