No, it didn't render 720P. With its standard mode, it didn't even render full 480P (nor did many PS2 games). Forgot where I read this from, but one of the developers had noted that there was some remaining unused VRAM and implemented the full frame-buffer setting. The setting was left hidden as there wasn't time to test it thoroughly before Going Gold.
For that matter, I don't know of any PS2 games that rendered in genuine 1080i. Even Gran Turismo 4 used a line doubling trick to fake it, and even then, only on one axis.
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