I have a TV that shows only 1080i or 480p/i but not 720p. Should I have the STB send 1080 for this channel or 480p?

The normal routine is to set your convertor box to match the resolution of your television and leave it there it will do the rest.

Set it to 1080i. Otherwise, you'll loose alot of picture information when it downconverts the signal to 480p. If your TV scaled it back up to 1080i; it will be based off a 480p picture instead of 720p one.