That might be a significant problem except that once set to 480p it stays on 480p (even over power cycles and software updates). In any case, I suspect that most people wouldn't have too much trouble finding a 720p capable display to do the initial (one-time) setup.
You can also select 480p by using a built-in feature on the Apple TV (the Apple TV will auto-cycle though each supported resolution). You start this process by pressing and holding down both the Menu and menu up [+] buttons on the Apple TV remote for about 6 seconds after which time the white LED on the front of the ATV2 will begin to blink. When the LED begins to blink press the Select/Ok button on the remote. This will start a cycle in the resolution settings that holds for about 25 seconds on each resolution. When a working resolution appears (in this case we're looking for 480p) use the remote to select from the options that you will now be able to see on the TV. Between each resolution setting the Apple TV will make one or two beeps to let you know that the process is proceeding (each resolution cycle takes about 25 seconds and on my ATV2 the 480p resolution takes four cycles).
If for some reason the process stops or does not begin correctly or you miss the opportunity to select the desired resolution then just do a restart on the Apple TV (press and hold down on the Menu and menu down [-] buttons for about 6 seconds). I've tested this process six or more times on my Apple TV and it usually works (eventually, a few times I had to do a restart).
You can also select the 480p resolution in the "blind" (since it is in a fixed/known location in the menu system). To do this follow these steps:
1.) Press the Menu button on the Apple TV remote once and then press and hold down on the Menu button for at least three seconds (returns you unconditionally to the topmost part of the GUI).
2.) Press the RIGHT arrow on the Apple TV remote at least 5 times (it may be a fewer number of times until you hear a change in the beep sound which will indicate you are at the end of a menu list).
3.) Press the UP arrow at least 5 times (it may be a fewer number of times until you hear a change in the beep). This will place you at the top-right of the GUI/menu system (at the top of the "Settings" menu).
4.) Press the Down arrow twice and then press the Select/Ok button on the Apple TV remote (this will select the "Audio & Video" menu).
5.) Press the Down arrow at least eleven times (or until you hear a change in the beep sound, you'll be at the end of the Audio & Video menu, "TV Resolution"). Press the Select/Ok button on the Apple TV remote (this will enter the TV Resolution menu).
6.) Press the Up arrow until you hear a change in the beep (this may take as many as eleven button presses and will place you at the top of the TV Resolution menu). Do NOT press the Select/Ok button, you are just positioning yourself to the top of the menu).
7.) Now press the Down arrow key seven times and press the Select/Ok button on the Apple TV remote (this will activate/set the output resolution to 480p). You are done and may never have to do this setup again.
There is one caveat to all of the above which is that your Apple TV must be running software v4.4 or later in order to switch to the 480p resolution. If you have an earlier version of the Apple TV software then you will need to perform an update to the latest software BEFORE you attempt the above resolution setting methods (otherwise, the 480p setting will not be an option). Version 4.4 came out in mid-October so I suspect that not all Apple TV2 units will have this pre-installed.