A 42" in 720p should be plenty good. If two or more people are watching at once, it'd be difficult to sit close enough to see the difference, especially on cable.
I've been watching a 55" 720p for almost 3 years now and still enjoy it immensely.
With 42" 720p will be fine. Enjoy! You'll even notice the improvement over cable or dish when you get a Blu-ray player.
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