Yes, the 312ppi LCD display of my 720p 4.7" Lumia 550 has almost all the sharpness you could wish for in ordinary use. You can see pixels if you look hard, but in ordinary use, you don't look hard.
1080p definitely keeps the screen looking really good. Obviously the 720p decision was a cost decision to try get the phone out to as many potential buyers. Which might be a good idea just to get first time customers and then you can slowly increase the price.
I think if you have a good quality panel, 720p can look good.......Yeah, it's tough. 1080p wouldn't have cost that much more, maybe $49?
For the 'average' person. I think they will still be happy