OK so this is it really. 2 main TV companies, the battle between Samsung and Sony
Samsungs give out an amazing picture quality, however the sound quality is not up to the standards of the picture quality
Sony also give out an amazing picture quality but Samsung takes the edge ever so slightly, but the sound is great on sonys
Then you have the other makes which too are good like LG and Panasonic
But my reccomendation would be a Sony Bravia set or a samsung.
I chose samsung as I'm running a sound system seperately in 5.1 ss.
For gaming you will be wanting a TV with less ghosting (image staying on screen) so look for a number lowest as possible for the ms response time.
All HD tv's will make SD looks ****e as the picture is out of proportion to what you are used to on your back to the future 90's machine.
Due to your TV being a 720p or 1080p and SD runs at 576 iirc so the picture is going to look bad.
However I think some Tv's can upscale in their hardware to get you a better looking picture and make you believe it is in HD but it won't be, it will just look better than normal SD on a HD display.
As for size. It all depends how big your living room is.
You wouldn't want a 46" display in a room the size of
my bedroom and like wise you wouldn't want a 26" in a massive living room.
I think 37" is a great medium and caters for everything and 42" can be too big for gaming
IMO. I would prefer to have a 26" in my room rather than my 32" as I like smaller screens for gaming, like 22" but if you are watching films in blu-ray you will want the biggest TV you can have in proportion to the room it's in.
Another thing to look for when buying a TV is the contrast ratio, TV's that boast a 1million to 1 contrast ration isn't true. Thats their dynamic contrast ratio and not their true contrast ratio. the contrast ratio is the difference between the deepest black to the brightest white, look for a high number, usually around 30,000 to 1 is the max you will find, higher than that wil lbe your dynamic and thats not the true contrast ratio.
And as for 1080p vs 720p. For gaming you will not even notice the difference between a 1080p set up and 720p setup. The main reason is most games are not even rendered in 1080p. I think only a few games are, ridge racer for ps3 and virtua fighter are a few off the top of my head but latest games are all in 720p or sub par. CoD4 supprisingly enought runs at only 600p!!
You will however notice 1080p when watching blu-rays.
My advice, depending on your price limit is to either spend good money on a decent 32" 720p set up with a high contrast ratio and good reviews or buy a mediocre 1080p television set. But if you have a lot to spend, get yourself a good sound set up afterwards. I believe that sound is just as important as picture.
This has taken me ages to write so I hope it helps