I have 8800gt driving a 70 Inch HDTV(JVC). My display resolution is 1080P. I get the same resolution in 2 ways
1)(Digital) DVI to HDMI
2)(Analog) 8800gt Analog-Component to Component of my HDTV.
I play video games and watch Blue Ray through it. Its a lot better than XBOX or PS3. PS3 Graphics engine is 3 generations old than 8800gt.
Your problem is mostl likely your TV. You need to get an LCD screen or 42 Inch 1080P DV.
You won't get a 1080P resolution unless your display can support it.