Well, Harmy could easily make the 3.0 MKV 1080p, but the AVCHD 720p. In fact, that’d make a lot of sense, since the AVCHD encode is so bitrate-limited that 720p might even look nicer. So 3.0 being 1080p might just mean business as usual for people who want 720p-on-DVD. I wouldn’t panic until it happens. And if it happens, good-quality re-encodes will certainly appear (as will bad ones, as usual).
EDIT: Damn I type slow.