Yeah a 720p screen seems like the sweet spot considering the screens size, and I think any higher would be too much overhead for battery life.
Vita is 960 x 544 I believe, so should look noticeably better than that (~75% more pixels).
It will of course output at higher resolutions to a TV. The resolution games will typically render at natively is another question however.
1080p downsampled to 720, 1080 for most games on the Wii U so doubt they'd take a step back.