Despite what most here are saying, it really all depends.
Some people believe that, theoretically, 1080i "should" look "better" than 720p. Others believe the exact opposite.
But in reality, a large factor in this decision is the equipment you have.
If you have a really crappy cable or satellite box, you might be better off letting the cable box output in native mode instead of forcing it to always output 720p or 1080i.
In fact, even if you have a really nice cable box, this might be your best bet.
If your cable box or satellite box doesn't let you output in native mode, you might have to experiment to see which setting works best for you.
If you output 720p, then your cable box has to deinterlace 1080i material and scale down to 720 pixels wide, then your TV will scale it back to 1080 pixels wide. In other words, 1080i source material will not look as sharp as it could. However, 720p material will look its best in this mode.
If you output 1080i, then your cable box has to interlace 720p material, and scale it up to 1080 pixels wide, then your TV will deinterlace it. Hence, 720p material will not look as good as it could in this mode. However, 1080i material will be mostly unaffected.
Only you know what programs and channels are important to you, and hence what format you need to optimize for in case you are forced to decide between 1080i and 720p constant output.