Nope I was wrong. It seems to be outputting 1080p via HDMI. I guess that explains why it is so choppy. The GPU probably just can't support displaying both 1080p and 720p simultaneously this way. There are no HDMI settings for HDMI output either. Quite frankly, this effectively makes the HDMI output useless to me. Why include the feature and make a media dock for it if it can't play media? I guess the good news is that I won't be spending $50 on a media dock.
I guess it works OK as a web surfer but regardless, you would be better off with 720p, for a few reasons.
1. The 1080p isn't true 1080p. It is 720p upscaled. Outputting 720p might be less stress on the CPU/GPU.
2. Many older TVs can't even take 1080p inputs. With 1080p you get a blank screen. They only take 720p and 1080i. Granted nearly all new TVs understand 1080p, but 720p would be most compatible and it's the phone's native resolution anyway.
3. If a computer monitor has less than 1080p resolution, it likely won't accept a 1080p signal. Many of these will accept a 720p resolution though.
4. It is impossible to get 1:1 pixel mapping for best text clarity. Since it outputs 720p upscaled to 1080p, text will always be slightly blurry, even on a 720p monitor.