Apple doesn't have to pick 720p/1080i/1080p to claim better than DVD quality.
It's curious that they are already bending the definition of HD by hosting
(852x480p) video in their QuickTime "HD Gallery".
Also, 960x540 can be used, in correspondence with the Image Constraint Token (ICT)
rules -- see:http://en.wikipedia.org/wiki/Image_Constraint_Token
Conveniently, this is the max for 30fps material using the AppleTV encoder settings,
as well as that transcoded for over-the-air material captured by Elgato boxen.
With Itunes hosting widescreen material at (effectively) 640x360 at 1.5mbps,
even sub-720p stuff at 960x540 (encoder rate 3.0mbps) will look much better
in comparison, with Apple preserving "better than DVD quality" claims.
P.S. I can't imagine Apple resorting to old-world tricks like anamorphic stretching
piled atop non-square pixels -- the digital world is destined to leave that ghetto.