The PS3 doesn't downscale to 480p if set to 720p. My HDTV tells me the res its being output at, blurays are 720p from the PS3. PS3 and Xbox 360 both support 1080p. That being said, I find I haven't played a game on the PS3 for about a year, and only use it for bluray. The Xbox controllers are more comfortable and the PS3 lacks a decent Forza 3 substitute until GT5 decides to get released.
If I hadn't been forced to buy a new Xbox a couple of years back due to the hardware pixies causing an RROD, I would be a little more interested. As it is, with the use of some careful tin foil placement and an oven, I have two 360s. Still nice design.