You can yes if the display is native 1080p. I'm speechless that some people question that.
Of course 720p will look perfectly fine on a 32" native 720p TV. It will look as good as 1080p on a 50"+ native 1080p TV. But people who think that you wont see any difference between 720p and 1080p on a 50"+ native 1080p TV don't know what they are talking about.
Of course if they have to reduce the gfx too much to attain 1080p then it will look bad. But that's beside the point. If current gen can't do 1080p with a good gfx quality it will be extremely disappointing to people having a big 1080p screen.
You are thinking of a monitor's resolution, not scaled resolution which is different. The output will still be in 1080p to match the monitors native resolution. What he was trying to say is if you rendered the game in 720 vs 1080 and then upscaled it to 1080p, 90% of people would never know the difference. You are talking about a monitor at non-native resolution because it's being fed to the monitor that way.
Watching 720p on a 1080P TV doesn't make much of a difference either as the TV will upscale it to match it's native resolution either way. I hook up my MicroServer to my TV via VGA and even at 1024 x 768 everything looks crisp just the same. Changing it to 1366 x 768 looks just as crisp.
Yuu are comparing non-native display resolution vs content resolution which are 2 different things. 720p content on a 1080p monitor upscaled to 1080p wont look any better or worse than if that monitor was also in 720p mode and being displayed natively.