You'll notice a difference even if you don't have 120 FPS. It's quite noticeably smoother feeling and more responsive even at 80 FPS. That's the main advantage of the 120hz, is it lower latency and gives you a more responsive feel when playing. An IPS panel at 120hz, if one existed (there are some overclocked catlaps that do) would somewhat counteract the benefit of the higher refresh rate with a high response time.
That's a tough call, on one hand I want higher resolution, and on the other hand 120hz sound great too. I play shooters a lot such as Battlefield and CS, so I will have to think about it.
I guess 1080p is fine for now, I might just go with this: http://www.asus.com/Display/LCD_Monitors/VG278HE/