In Apple's recent Quicktime update, they added a feature called "Export to Apple TV," which can scale video to 720 by 404 (DVD quality) or 1280 by 720 (720p) resolution via the H.264 codec.
So what does this mean?
While Apple has not yet announced 720p iTunes downloads, this update certainly supports the theory that they will begin offering HD content soon. Furthermore, this high-quality export option should allow upconversion of your current SD iTunes movie/show collection, even if the quality probably won't be much, if any, improved.
Be that as it may, Apple TV has a long way to go before I'm sold on dropping $299 for a fairly limited media streamer.
Quicktime Gains 720p Export [ilounge]