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Depends, but a lot of content will be 1080p native.

Your understanding is not correct, you may be confusing audio output options where native high-res DD/DTS versions can be accomodated by 1.3, but that's kind of a moot point since you can go PCM output currently with 1.1. All versions of DVI and HDMI are fully capable of video output at...

Of course. I don't know why Shane mentions HDMI version, that's not relevant. Your display should scale everything to it's native 720p rate just fine, and in addition the players should have downscaling capability as well. It's really no different than current HD 1080 sources into your display.