Hi, if the GPU you purchase supports the resolution in question (1920x1080) then it should work just fine. So look for resolutions supported not it specifically saying "1080i/p". Now having said that I suggest when you get that set up make sure the resolution on the PC is set to exactly that either in display settings or utility.
That should solve that problem, now the only thing you might need to worry about is HDCP standards for your devices possibly. Depends on what media you are running and how you are running it. Assuming you are using this for movies and all that and not only gaming. Either all the devices "in the loop" ie graphics card, monitor/tv, etc need to be HDCP or use a 3rd party app such as AnyDVD by Slysoft to circumvent this issue entirely.
As for the connection out to the TV, DVI/HDMI etc. That is more of a preference cause DVI will give the same quality as HDMI but you would need an adapter if your TV doesn't have DVI input. Small extra cost or you can buy a card with HDMI built in. There aren't many out there thus far and I'd suggest just getting a card that meets your needs, supports 1920x1080 resolutions and get a DVI to HDMI cable/adapter if you plan on inputing to the TVs HDMI.
Hope that answers your questions and was clear enough, haven't woke up good yet enjoy!
Thanks guys very helpful. My main problem then by the sounds of it was I was expecting them to state explicitly it supporting 1080i because such a big deal is made of it for TV... whereas it sounds like graphics cards been able to offer it for ages
Also you need to watch out for overscan, I've been struggling for months, but to no avail. I've been having to use a custom resolution. I'm not sure how ATI handles overscan though, but I'd stay away from Nvidia while using a HDTV.
With a PSU that small you are gonna be pushing almost any discrete solution... When my friend was running his 6600 GT and Athlon 3800 with a crappy 250 watt PSU his system slowly fell apart and died. A modern video card and a dual core processor will prolly kill that system.