I'd imagine that it actually depends on:
1) if your TV (and AV Equipment) will accept (and HTPC will output) a 120hz signal VS it's internal processing and then:
2) the quality of the interpolation algorithms used in the HTPC (or whatever is generating the additional frames).
To point 1: As far as I know the only frequencies defined in TV Land for TRANSMITTING Video over HDMI are the CE standard timings like 1080p (eg 1920x1080@24/50/60hz). While I’ve read some thread that talk of CE equipment that may accept “PC” timings I've no real advice on this. It’s a bit like all the old analogue 100/120hz sets – yes they can refresh the screen more often but the TV Signal was still RECEIVING the same old PAL/NTSC signal.
To point 2: As an example my Kuro's internal process works at a multiple of the signal received (eg it runs internally at 72hz if it gets a 24hz feed). Advice from the Tech doing my ISF Calibration is that the algorithms used by the TV's to interpolate (rather than just repeat) the additional frames (eg from 24 to 72) are showing promise but still tend to introduce odd artefacts and while his experience has shown you can get “smoother” output he turns these interpolations features OFF.
So the result is that your transmission choices between the TV / AV Receiver / Video Source are still the same is still defined CE/TV based frequencies of 24/50/60hz and since media (Disk / Broadcast signal etc) is still produced in 24p / 50i / 60i you either match the two together or accept (not notice) the work done to adapt a mismatched frame to frequency rate. Even the PS3 with all it’s wiz bang core processors detect and switch it’s frequency output to match that of the media being played (between DVD and Blu-ray anyway).
While not everyone has the same setup, this debate is of particular importance for these in the CE world (with general AV Equipment) as these devices tend to follow the usual CE standards not the PC ones. These issues also become far more apparent the larger your Display Device gets. I know that playing 1080/24p material on a PC’s 22” 120hz PC monitor looks good, but so does low bit rate bit torrent material on this rig but looks terrible on the 60” Kuro.
Thanks
Nathan
PS - I'm always willing to come around, have a glass of wine and have a look at other setups!
EDIT - Here is a simple write up of the pro's and con's of higher freq internal processing on TV sets
http://reviews.cnet.com/4520-6449_7-6792632-1.html - All aimed at how a TV processes the received Video signal - none of which address issues intoduced when adapting mismatched frame rates to the frequence by the device used to transmit the signal to the TV.
EDIT2 - couple of other sources:
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http://en.wikipedia.org/wiki/Telecine : an overview of how media is adapted from say Film (24fps) to PAL (25/50) or NTSC (30/60 hz - excuse the rounding). This is importantant for how a Video Player (HTPC etc) reads a Source (file disk at say 24fps) then manipulates it to output the signal at another frequency (eg 50/60hz). The problem of Telecine Judder beomes incorporated into this output video feed if there is a frequency mismatch.
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http://en.wikipedia.org/wiki/Motion_interpolation : how more modern TV sets receive a video feed (at a particular frequency) then manipulates it for display.