I totally agree. This should be a setting that you can choose, not the way it is. I watched a youtube video just now that halfway answered our questions, and tried it myself. The *very first* thing that you add to the iMovie project dictates what resolution it will be. If you start a new project and add a 1920x1080 jpeg as the first thing, then go to "share", you'll see 1920x1080 as an output option. No matter what you add after that, you'll still see 1080 (lower resolution videos won't be "upscaled" but at least the high res ones will display at full resolution).
I have tested this by adding a 720p video after the 1080 jpeg and it still offers 1080 as an output resolution. However, if you add the 720p video *first*, then your only output resolution option is 720.
SO. The question now becomes, how do you *change* a video project to 1080 after you've first added a non-1080 media? I don't know the answer to this. I have a project I've spent hours on and want the full-HD sections to display in 1080, but the first thing that I added many hours ago wasn't 1080, so it looks like I'm hosed. Anyone have a solution to this?
It should always just be a selection, maybe with a disclaimer that says something like "Parts of your project aren't actually 1080. these will only display at their native resolution." It's crazy that we have to jump through the hoop of starting out a video with a 1080 image.