"A 720p screen will be sufficient - the limiting factor is going to be the signal going into the TV, rather than the screen resolution. If you were using LoveFilm to rent BR discs, then I would say get a 1080p screen."
At this stage, I think there's still some way to go regarding dropping prices on the LED TVs, and I'm not convinced a "smart" TV is guaranteed to be the best option. I see it might be nice to have everything in one box, for neatness, but (assuming it doesn't include a DVD player) wonder what else will be plugged into it.
In my case, I bought a low cost (290 quid) 42" TV late last year. It's not a well-known brand (Hannspree, AKA Hanns-G, which is a firm that's made displays for computers for years, and has moved on to TV / bigger screens).
I also bought a PS3 (which plays Blu-Ray and ordinary DVDs). The PS3 can handle Netflix (though I am not a customer yet), LoveFilm, and iPlayer, plus 4oD and ITV player (no cost, though I think I needed to register for PlayStation Network, after which it could download the necessary software via an ethernet cable into my ADSL router... PS3 can use wireless but I prefer cables for streaming as I have a number of Wi-Fi items in use already, and LoveFilm needs around 3 Mbps by itself, so could hog quite a bit of the Wi-Fi traffic).
No "3D" or anything like that (basic entertainment channels on Sky, though I have a FreeSat HD box for another room), but I have another set if anything went wrong with the TV, and if the PS3 was faulty, I'd still have my TV and Sky box to entertain even if the "online" features from the PS3 (and Blu-Ray of course) were not available while PS3 is away for repair.
I can see how a super-slim LED TV might be a very attractive option (one with integrated FreeSat HD and Freeview HD, perhaps, so no separate satellite box would be needed), but my angle is that separate boxes can be replaced or repaired without losing all functionality, and maybe in 5-10 years I would be ready to consider 3D.
Right now even Full HD isn't something I find 'essential' but I would still go for a 1920 x 1080 screen, partly because that's now the expected standard for BR and most of my PCs can output that, but also because I don't see the point of buying a 720p screen now and then buying newer boxes which will make it the "incompatible" well before it is due for replacement.
I'm just about to hunt down another 40"/42" TV with 4 HDMI inputs (whereas the set I bought only has 2 and cannot cope with Freeview+ box, Sky+ HD, PS3, and my Toshiba laptop very well). Whatever I get will likely have Freeview and be 1080p but the more important choices for me will be price and 4 inputs than whether it is Plasma, LCD, or LED.