Yes, I see no fundamental reason why, with a fast enough clock speed and some well written DSP drivers, you couldn't decode in real time, then downscale and output at standard TV res.

As the Ti specs for the OMP3[54]30 say up to 720p, this probably means they don't think the hw has sufficient grunt to decode anything more (and that's will well written DSP decoders too), rather than worrying about the output frame size.

e.g. The spec sheet mentions XGA (1024x768 pixels) output, which is smaller than a 720p frame.

The question is then whether the additional clock speed boost from overclocking is sufficient to perform the extra decoding in real time. And you also need to write some decent DSP code.

Edit: I thought we were talking about 1080p for some reason - so yes, the N900 hw should be able to decode 720p with well written drivers and a fast enough clock speed.