I have the LN_S2651D which is similar to yours. I used HDMI output of PS3 to TV. Now everything is digital. No NTSC business. Do not bother whether the game is 720p or 1080p compatible, when using HDMI input. The question of upgrading or down grading is applicable only if the game is compatible for 1080p only. Most of the games have 1080i compatibility. Your TV is also not 1080p compatible, I hope!
Can somebody please explain the hole PS3 downscailing thing for me because I just got an SAMSUNG LN-S3251D and I want to know would the PS3 downscail on my HDTV.