I have an older Sony 23" WEGA 720p, which is older than the 720p model you're considering, and it looks fine with SD channels. But, I also have a 55" Sony SXRD and a 46" Toshiba (both 1080p), and all 3 are equal when displaying SD, which compared to HD channels, is relatively bad, but acceptable. If you expect to see an image equal to an old CRT 26" TV when watching SD, then you won't be happy with any flat-panel TV you purchase because the new flat panels are designed to display HD content at it's best, not SD. SD content is secondary. SD images on an HDTV is a compromise, but some HDTV's do in fact, do a better job than others.
A major factor in displaying SD content at it's best is how you have your TV connected to get reception. If you have your Toshiba connected with rabbit ears, then SD will look it's worse. If you have cable or satellite, then the worst connection you should use from the box is Component, and ideally you should connect via HDMI.
Does anyone who has the Sony KDL-26L5000 use it for standard defintion tv? I purchased a Toshiba that i wasn't happy with in standard definition quality, so I am planning on returning it. The KDL-26L5000 looks like a quality television, but i wanted to know about its standard definition quality before I dropped the money.

Chowhound
Comic Vine
GameFAQs
GameSpot
Giant Bomb
TechRepublic