No, that is not true. If you want to display at 720p for BluRay then the movies will display at 720p. The BluRay on the PS3 can display at 1080p, 1080i, 720p and 480p. If the movie your are playing is a BD movie then it will display at your highest resolution.
The ONLY TIME the PS3 downrezzes is during games. If you have a 1080i set that can not accept a 720p signal and the game outputs only at 720p then the PS3 will downrez the output to 480p. This is during game play only and not for BD movie playback.