If you are careful with your TV, I would go with a Plasma.
The colors and brightness just look better, very close to a CRT TV.
If you are a little more careless, like me, I would get a LCD.
They cost a little more for the same size but you can do a little more with it.
I first purchased a plasma. The games looked amazing. The colors looked amazing.
Well sometimes I stay up late and I fall asleep, I didn't want to worry about burning in the NXE to my TV. At first I didn't notice much Image Retention, but after a little while it started happening even after only a short play period. Keep in mind that I broke my TV in for 200 hours. Well, in short I didn't want to worry about that, plus I wanted to be able to one day use the TV as a monitor. Bad Idea for a Plasma. Also has glare like someone said, not good for a room with constant lighting. Weighs more, uses more energy, and extremely hot(great for winter though).
Now I have a 1080p LCD, which I returned my Plasma for. The LCD's colors are not as vivid as the Plasma. The blacks are not as dark as I wish them to be, but with a Xbox 360 you can turn on the extended black level and make them darker, I believe. I can tell between the 1080p and 720p on a 42" TV, distance matters, I game about 4-5 feet away from my TV though. At 32" it probably won't matter. I can now use my LCD as a Computer Monitor which also displays at 1080p through DVI=>HDMI. I can now fall asleep watching a movie and not worry about burn in, I can watch sports channels or News channels with a constant static ticker without worry. The screen has no glare on a bright sunny day. Weighs less, uses less energy.
Both types are wonderful.