Should I be using 1080i?

[dwesson]

OK, I know this is discussed all of the time, but I'm hoping to get an answer specific to my current setup.

I recently bought a PS3 so I can start future-proofing and enjoying Blu-ray, but my HDTV is a couple of years old (Sony KDF-50E2000) and isn't exactly up to today's HD standards. I've played around with the settings on the PS3 and TV to the point where I'm happy with the picture, but I'm not sure whether to set the PS3 to output at 720p or 1080i (the PS3 "auto sets" itself at 1080i through the HDMI).

I thought the 1080i picture looked really good, and couldn't see an immediate difference switching to 720p, but I'm now finding out that my TV failed the "deinterlace test," which makes me wonder if I'm only seeing 1080i as better because of the larger number (placebo effect).

I need to know if it's best to output from PS3 at 1080i and let the TV downscale to 768, potentially losing resolution (despite me being unable to notice easily) or to output from PS3 at 720p and let the TV upscale to 768.

I'd like to know which will give me the better overall PQ, as well as which method is making my system do unnecessary work (if either). Sorry for the long post... I'm just really interested in hearing an answer other than "whatever looks best to you." My own perception is not satisfying me at this point.

EDIT: If it makes a difference, I will be using the PS3 for Blu-ray and DVD about 90% of the time, so any difference pertaining to videogames is not really an issue.