Your eyes and display should tell you what's best.
Interlaced vs progressive are two different animals entirely. The refresh rate also plays a big part in interlaced... more so than with progressive (480P, 720P, 1080P). Distance too will overcome minor annoyances, or artifacts.
The channel you are watching is going to make the decision for you usually. Although I've got my box set to 720p, there are those stations which don't send out 720p info, and use 1080i instead, and vice versa... also some are still 4:3, not 16:9.
Upsampling one format to a higher resolution simply doesn't always make the image better... as you are telling the device to fill in missing info by 'guessing'.
Sometimes the image is degraded with artifacts, and not improved at all. Much of the time it is just made to look smoother on static images, and revelas it's true self ojn fasxt moving scenes. the display, technology employed, and components are all responsible for overcoming such errors when upsampling video images.
Progressive images should provide more vibrant colors, and an easier to view image... and I do mean 'should'.