Teky - I did some digging up on the internet and I believe in the case of Panasonic Plasmas they offer this feature of going Full HD at lower refresh rates. I do not have the links with me though. So you might want to check up on this. If I do manage to come up with the same links I will send them to you. In fact I would love to know more about this as it provides not a little delight to the viewer.
Unlike CRTs, all LCDs & Plasmas are fixed resolution displays and are thus capable of only displaying one fixed/native resolution. Accepting signals of different resolutions, is quite different from actually displaying the signal. Thus any video signal, lower or higher than the native resolution of the LCD/Plasma tv, is scaled up or down by the tvs scaler to match the TVs native resolution. In the case of a '1366 x 768' tv, even 720p signals are upscaled to match the native resolution.
So what I see is a downscaled version of 1080p? So 1920*1080 is being fit into 1366*768? Somehow the image is not distorted.
The normal refresh rate of the TV is 100 Hz and at this rate it can only display 1366*768. At 60 Hz it can display 1920*1080 (or a scaled version thereof). If somebody can tell me how this exactly works, that would be great.
Your plasma TV has a WXGA resolution of 1366 x 768 (1049088 pixels) in a 16:9 aspect ratio. Whereas, the 'ATSC 720p HDTV' standard has a resolution of 1280 x 720 (921600 pixels) in a 16:9 aspect ratio.
The reason why you do not see any distortion due to the upscaling of the '720p' signal to the 'WXGA' resolution is due to both having the same aspect ratio. It is because of this reason that you do not see any distortion with the downscaling of '1080p' signals also. In the case of a LCD/Plasma display the 'refresh' rate has no role to play in this.
As others have told even if you feed 1080p input, the pictures you see on the TV are only 720p.But you don't have to worry that the full HD pictures may get distorted on HD Ready Plasma. On the contrary even the downscalled 1080p inputs on the TV looks better than the 720p movies.
Actually this is not always true, infact it very rarely is. In most cases, you generally get the best results by inputting the closest resolution to that of the TV. In the case of a 1080p signal, you can either let your player output a downscaled signal equal to the TVs native resolution or you can input a 1080p signal and let the TV do the downscaling. Which of the two is better, will depend on the quality of the scaler built into your player and TV. The best option is to try it both ways and decide based on the results you see. In the case of the Panasonic 42C10 and a PS3, I can assure you, that you will get far better results by setting your PS3 to output a 720p signal thus reducing the amount of scaling done by the TV. Bottom line is, that the PS3 has far better scaling abilities than most TVvs, let alone the Panasonic 42C10. Thus I would suggest that the output of the player be set to 720p.
If you wish to experiment for yourself, then without changing anything on your TV, just let the PS3 display its GUI and switch the display resolution setting between 720p and 1080p. See the difference in the readability of the text, between the two resolution settings.