Use 1080p for blurays. If you didn't, then PS3 would scale 1080 to 720p and then your TV will scale it to 768. You don't want the signal to be scaled twice.
I'm not sure about games. I don't know if PS3 would scale a 720p game to 1080p (if 720p was unchecked in PS3 settings). If it would, then that would be bad, since the game woudl be scaled twice. I think if you enable both 720p and 1080p in PS3 you should be fine.