Did I make a compatibility mistake?

[carsonie]

Newbie finally dumps 20 year-old Sony TV and makes new purchases: Sony KDL 40S3000 (720p) + Monster HDMI cable + BDP S300 + Phantom of the Opera (Blu-ray disc at 1080p) = Stunning picture detail and color, but the picture does not fill the screen. Why not? What would i need to change or exchange in order to see Blu-ray discs at full screen? (I fear you are going to tell me I have to have a 1080i or 1080p HDTV for an additional $1200 or else change the aspect ratio, resulting in a distorted picture.) The "experts" working in the stores seem to be giving me incomplete or wrong info. I was told that 1080 would only pay off if you were going for a screen larger than 40". Otherwise all those extra pixels would not be all that noticeable to most people. Well, I sure noticed a smaller picture than I expected, albeit a picture that is totally incredible. (For example, the Blu-ray revealed for the first time that sparkling confetti is falling from the rafters in the ballroom scene!) Thanks in advance for any ideas.