Topic.

Basically, I don't have a fancy pancy TV with 1080p (I wish I did, oh how I do...)

I can only do 720p and 1080i.

1080i is great for some of my games like Gears of War 2, Fallout: New Vegas, etc. (More slower paced, grungier gfx). Only reason I ask this is cause my tv makes things alot more "sharper" and "crisper" when under 1080i compared to 720p. (720p kinda makes things a lil more "blurred")

So?

concel games maxs out at 720p/i

If you're playing on console, 99% of games are made to run in 720p, but can be upscaled to the higher resolution, or dropped back to 720i or SD - but some games don't have decent SD optimisation and the text becomes unreadable, or (as in the first PS3 Sonic game) cutscenes don't play properly on SD TVs.

On some TVs, some games will look better upscaled than not, on others, they'll look better at their base resolution.

Pretty much, try all options, see which looks best on your TV.

My TV can handle 1080p, but the PS3 doesn't like connecting to the TV when it's in that mode, so it may as well not. I use 1080i for most, but not all, my games.

720p.

720p is Console Standard for Xbox. There are some 1080P on PS3 though, I think. But yeah, most games are 720p.

Question is: What kind of display do you use, then?
Is it a CRT monitor, or a PC monitor, or a LCD or Plasma TV?

Only the first actually makes use of i-formats (interlaced; 720i, 1080i). The others can all use p-formats (progressive; 720p, 1080p).
So unless you're using a CRT, go with a p-format.

if your using an HDMI cable use either 720p or 1080p
if your using a component cable use 720p or 1080I
the reason being is component cable is is hd just like hdmi. only component is 1080i and HDMI is 1080p
the game max's out at 720 depending on the tv your using will determine what will be best..