Uh Karaam do you even know the difference between progressive scan an interlace scan? I mean by reading you're post you appearently have no idea what you're talking about. When the 360 is running 1080p it's not "like" 1080i. Oh and 720p is better than 1080i anyway.
When people talk about 720p as the native resolution it usualy has to do with the sharpness of the textures. When the 360 upscales to 1080p, the resolution is higher but the texture won't be any sharper. Therefore edges might appear smoother but that's about it.
Full HD LCD HDTVs run at a native 1920x1080 resolution so when you output 720p the tv has to simulate the coloring of certain pixels in order to have the image fill the whole screen. When the 360 upscales to 1080p it doesn't just guess/simulate what color pixels to use to fill the image. Being able to run the game at your TV's native resolution its the main benefit of upscaling.
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