720p movies are not supported

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Just bought a DVD home theater this Christmas with HDMI interface to output an upscale video up to 1080p or 1920x1080 of resolution. I decided to buy it so I will be able to use the HDMI port of our HDTV and play HD videos. Through this, I can feel like I'm utilizing the capability and features or our HDTV to the fullest. Though I have some HD movies saved in my computer, I wasn't able to play them in our DVD Home theater because they were in MKV format so I still have to convert it into AVI or DIVX that was supported by our DVD player. It took me a long time to find a good video converter without losing the video quality that much so I was only able to finish converting movies this last weekend. I was so excited to watch those HD movies and to my frustration, our DVD player doesn't support their resolution which are 720p or higher. I gave up testing the movies since it always displays a message "video resolution not supported" so I just decided to do a research about it. After checking some forums regarding their players displaying same message as ours, experienced users have explained the common misunderstanding with what the 1080p/i really meant. Our player actually sends output in our TV in 1080p/i but doesn't also mean it can play any video with greater resolution than of DVD which is only 480p. After knowing this, it leaves me no choice but to re-encode my HD movies into lower resolutions that our player can support. I wish I have known this already before buying a DVD player but its alright since our old DVD player was broken so it really needs a replacement. -)