I assume that means the actual resolution of the picture will be 1024x576.
You need to bear in mind that the 720p resolution is based on the 16:9 aspect ratio, whilst your plasma is 4:3, so while you have more height, making it seem like you've got higher resolution - you actually lose resolution because of the width.
So I set my HTPC to 1024X768 in Windows, then when I watch 720p I just go full screen in media player?