1080i and 1080p are two slightly different ways of delivering the same thing: a two magapixel picture. 1080i scans the picture in two passes, 1080p does it in one.
Now because your TV can
only display 768p*, sending it only 1080p or 1080i would be a bit pointless, however, sending it only 720p (or ideally 768p, if it's an option) may not be pointless, as there is a chance the receiver's video processing is better than the TV's.
My advice is, don't get too caught up in the notion that "1080p is the best, period", because the visible benefits of 1080 (be it 'i' or 'p') are only had with a native 1080 display and specific screen width/sitting distance ratios.
(
some nice information on 1080p and 1080i... with pictures!
)
*
the reason you can watch things that are not 768p (like DVD's, which are 480i), is because the TV stretches (or shrinks) the incoming video to 768p.