You are sort of correct but not compleatly. Can you or I tell the diff between 720 vs 1080 on a 5" screen? Maybe not. Scaling (interpolation) could be an issue either way and higher native generally scales down better than scaling up. That said not really alot of 1080 needed so 720 would do fine. Consider everyone who buys a 1080p HD TV is watching sports at 720p, so if full screen scaling is going on. 1080p is not a broadcast standard. No one seems to bitch.
On battery drain a little ahead of the curve but I suspect overall area is more important than resolution.
So like I said you are correct kind of. I am fine with my 720 but I might go for 1080 on my next.