I only buy HD on iTunes, but I only watch SD for 99% of my TV shows. Movies it depends. If it's a kid's movie we've seen already: SD. Also if it's the latest action rental: SD. I rarely rent in HD unless cinematography plays a large role in the film.

480P looks surprisingly good on iTunes. Much better than DVD typically. I'm OK with that for the most part.

OTOH Netflix's auto-scaling is clearly the future.