That's because from 7ft with a 42", you still have not even
begun to get
any benefit of 1080p, assuming 20/20.
Also, all panasonic "720p" plasmas are actually 768p in native (horizontal) resolution. You will have to investigate to see if it has 1024 or 1366 vertical lines of resolution.
Because the vast majority of 720p TVs are actually 768p, it is best to leave the bluray player to output 1080p (assuming the TV can accept it), so that only one instance of scaling occurs. If you output 720p on the player, the tv then has to scale a second time to get it back up to 768p, or IOW, add another 127,488 pixels.
edit: oh, congrats to Pat. 'bout time!