Hey there, mixed messaging! As Netflix makes the case to Wii owners that they really aren't missing anything by not streaming HD, word from CNET is that Netflix instant streaming is making the jump to 1080p, with 5.1 audio. UPDATED
CNET doesn't have any info on which devices will support the upgrade, how much of their video library will be encoded in 1080p (only about six percent of their current catalog stream at 720p), or when exactly the new content will be available, though they can offer a vague "later this year." What we do know is that Xbox already streams 1080p over Silverlight, the same tech that Netflix uses, though its Zune store, and that it looks pretty great.
One can only assume new content will work with the Xbox 360 and PS3, though it's not clear if some Blu-ray players and set-top boxes have the power to decode 1080p video. 1080p streaming on the Wii, and through many computers browsers, is completely out of the question. Netflix, by the way, is totally fine with that—as long as people are streaming something, Netflix is happy.
UPDATE: Says CNET:
Netflix now claims that it incorrectly acknowledged 1080p streaming in the company's 2010 development road map. A Netflix representative has clarified that the company plans to bring 5.1 surround and closed captioning to its streaming HD videos later this year, though 1080p Watch Instantly is not on the books for this year.
So, 5.1 audio is coming this year, and 1080p video probably isn't—at least, that's the official line. [CNET Web Crawler]