AFAIK, there aren't any plasmas that are 720p. They will come as 768p. Therefore, I normally recommend feeding 1080, so that scaling only occurs once.
If you output as 720p, not only did the player have to scale that once now, but then the TV has to add another 127,488 pixels to get it back up to 768p.
So, this leads me to ask the same thing zhimbo did below. Which discs? Grain is part and parcel of film. Without grain in film, you will lose visual information that is inherent to the picture. This is why some nutty videophiles are so adamantly against digital "scrubbing" known as DNR.