Another factor driving Apple's strategy is the simple fact less than 5% of Americans have an HDTV with a screen size larger than 42". And it's almost impossible to see any difference on a 42" screen between 720p and 1080p. So if you are Steven Jobs, or any other CEO who is going to maximize shareholder profits, you are going to go where the money is.
And the money is with the video downloaders who will be perfectly happy with 720p. I can respect the fact you want 1080p with lossless audio, but the brutal fact of the marketplace is that you represent an insignificant group of consumers that no mass marketer gives a rat's tutu about.
I am not against 1080p and fully lossless audio - I, too, would prefer it to downloads, but 5 years from now, IMHO, this will be an even smaller market than those of us who still purchase newly pressed vinyl records. Were I the CEO of a video hardware or media content company, I would be wasting my time chasing 1080p physical media products - A smart CEO, like Mr. Jobs, will be looking how to get more of the 25 and under consumers to buy more iMovies and iTunes, because that is where the money is going to be made.
Yes, a few specialty manufacturers will likely continue to carry the torch for 1080p hardware, and maybe even a couple the content companies will offer 1080p physical media for a few more years, but the marketplace reality is that it is much, much less expensive to ship electrons to your home than to manufacture and ship a high-resolution DVD to your home.
Verizon has also figured this out with their FIOS service that runs fibre directly to the home. They are once again the US's largest telephone company and their foresight in investing in fibre to the home is going to allow them to sell many, many movie downloads whilst the other telcos and cable companies scramble to upgrade their infrastructure. Even Consumer Reports ranks FIOS as the best of all of the integrated voice/broadband/video services, and it is the fibre to the home that makes Verizon the 800 lb. gorilla right now.
Like I said in my first post, Blue-Ray may have won the battle, but both high-resolution physical formats have lost the war - They just don't know it yet.