I feel a movie is more immersive without letter-boxing. The borders distract me while I watch the movie. This is especially true on a glossy display as it's pure black, which reflects most clearly.
I like the 16:10 aspect ratio as you can zoom up 16:9 movies and not lose much. 4:3 crops out too much and it's not like you can zoom in a notch, it's full crop or no crop.
The iPad display shows 17% less than 720p. In term of movie size, it's more like the SD resolution 576p as in anamorphic widescreen DVD 1024 x 576. If you display a 16:9 movie, you'll only fit 1024 x 576 on screen.
I think to avoid confusion, XL is a more appropriate identifier but people know what HD means so I don't think it matters.