I haven't had any problems with this on mine, although 720p programs are generally not as crisp as those in 1080i (as long as they're not moving, that is...).
Did you have 720p included and native on when you were having the problems? Was it certain programs/channels, or all of them that were 720p? HDMI or Component?
Just trying to isolate the problem... I briefly tried Native on and had 480p, 720p and 1080i selected... and I didn't notice much, if any, difference between the PQ of 720p and 1080i....
That might have more to do with ESPN being MPEG2 than it does with the fact that it's 720p... just a thought. I've never been all that impressed with the PQ on ESPN with D* - just waiting for it to switch to MPEG4.
You might check some of the new channels that are 720p when they are showing actual HD content and see if you have the same problem. Or your Local ABC or FOX station, if you get those from D*.
I have a Sammy 72" 1080p DLP and have noticed that the 720p feeds do not look as good, especially on motion or large areas of the same color but slightly different shading (such as on walls, especially red walls).
I get the best picture forcing the HR20 output to 1080. I have both components and HDMI hooked up and I jump back and forth to attemt to see any difference. They are slightly different pictures, but I can't say I like one better.
My Sammy DLP has a much better picture than my 45" Panny plasma.