Unless I'm missing something, it seems that 120hz modes look like crap. If you're watching a movie or show with live actors, it makes it look like you're watching a home video or something. It's like watching tv at 60 frames per second.. I couldn't stand it.
at 32" , 1080 won't look better unless you have extremely good eyes, but there will be slowdown from rendering at a higher resolution. I'd suggest 720p without 120hz, unless someone can explain some benefit to 120hz.