Before you mark this as solved by simply saying: "Your TV downscales the image" wait a while.
So, as the title says my 720p TV is displaying 1080p fine. The strange thing is, even 1366x768 is blurry. 1600x1024, 1600x1050 and 1768x922 are also blurry. And 1080p is..... Sharp! In fact its very sharp! So why? It can display 1600x900 fine too. No interlaced resolutions are sharp. Not even 1080i. Can someone explain this? And its not downscaling, because if it was, it would have been blurry like interlaced signals.