Like Zib says 1680x1050 is the dimensions of the 20" screen which is a little short of 'true' HD at 1920x1080. It will playback 1280x720 since it obviously has enough pixels to do so. The graphics cards are called HD because they contain hardware to help with decoding certain kinds of HD video content. Appl doesn't leverage this particular feature in its drivers at the moment though. Technically, computers have been HD for years. I have had a smurf running 1920x1080 on a CRT using the stock graphics card. Display resolution took a step backward with LCDs, but the first HD apple (LCD) display was one of the ADC flat panels (I forget whether it was a 22" or a 23").
Quicktime will happily playback HD content, and therefore so will iTunes (though iTunes is restricted to mp4 and h264 files). Pretty sure Flip4Mac and the popular avi codecs support HD in QT too. VLC certainly plays HD avis.
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