DailyTech reported last week that Sony's PlayStation 3 has issues with upscaling to 1080i resolution. The problem stems from the fact that some older HDTV's can only display in high definition resolutions of 480p or 1080i -- 720p is not an option for these TVs. For a PS3 title running in native 720p resolution, a PS3 will not upscale to 1080i, but will instead downgrade to 480p.
According to GameDaily BIZ, Sony has acknowledged that this is a problem for the PS3. The following statement was provided by Sony Computer Entertainment America:
A small number of older High Definition television sets found in the United States only have 1080i inputs for HD signals. Those televisions will currently only play some PS3 titles at 480p resolution. PS3 games render images at either 720p or 1080p for High Definition and you need 720p input on the TV to play select games that do not support 1080p. This is an issue on the side of the individual television sets, which do not accept 720p input, so when a game outputs an HD signal only at 720p, these select TVs have to display the game at 480p instead.
A fix is in the works, but there was no timetable given on availability.