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The PS3 can't downscale blu-ray discs to 720p; it's as simple as that. You'll just have to enable the '1080i' option whenever you want to watch a blu-ray disc. 720p is best for games in your case.
Thanks. I guess i'll have to do that.
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Wow, that was a damn retarded thing for sony to do now wasn't it, so basically if you are watching some fast paced movie in hi-def then you have to deal with the stairstepping of 1080i if you don't have 1080p. And i've heard the ps3 is the best player out so far, so what does that make the rest of the players like?
from what i've heard it's an ok blu-ray but not great. i think it was said in one of the last 2 DLtv podcast