The only problem playing 1080i through a 720p display is that you end up with multiple progressive/interlated conversions - 1080 progressive to 1080 interlaced then 720 progressive. Technically with proper pulldown detection it shouldn't cause issues, but there's really no benefit to giving your set 1080i versus 720p.

With some cheaper screens there is an actual reason not to do this - as to convert 1080i to 720p they simply discarded one of the fields, resulting in the equivelant of 1280x540 resolution.

If it were one of those 1366x768 screens then there MIGHT be a reason to give it 1080i (for a few more pixels resolution), as long as the built-in scaler works correctly.

And on TV sources, I know with my cable box I do see occasional issues with 720p to 1080i to 1080p.