..... Except, the Apple TV still won't change to the 1080p.
It's likely not as bad as you think, if your tv is 1080 then that's what you will be watching whether you have your tv set to upscale the picture to 1080 or whether the tv outputs at 720 and lets the tv upscale to 1080.
The worst scenario for you would be if the tv wasn't as good at upscaling as the tv. This largely depends on how good your tv is.
For example. We have a 50" LG tv in the front room, which is a little wacky since its display is actually something like 1366 x 768, so no matter what resolution we set the tv at the tv will always do some scaling. However it was noted that the tv is actually very good at scaling, indeed it's better than the tv (probably due to it costing c£ 3,000). So if we have a SD file, we get a better picture when the tv outputs at SD than when it outputs at 720, however we can't keep shifting resolutions to match our content so the tv is set at 720 (if it wasn't we would lose much of the quality when we play >SD content.
On the other hand our tv in the bedroom is a 46" Sharp Aquios and its upscaling is lousy. It's so poor that if we watch a SD tv broadcast (upscaled by tv to 1080) live and compare it to a recording of the same broadcast and played through the tv (output at 1080) the recording is noticeably better than the original broadcast.
I guess what I'm trying to say is that it all depends on your equipment.