First, the 1080(i/p) resolution is 1920x1080. I, however, have a standard wide screen lcd sporting 1680x1050 on my computer. Will the recording scale down to my screen size when playing back? Do I need to use special editing software to scale it down? Otherwise am I stuck recording at 720? Will it basically look like total crap?
The resolution of your monitor will have no effect on the recorded video. Your monitor WILL play the true HD (1920x1080) video without any problems, it will just display it at your native resolution of 1680x1050. There is no scaling or conversion done. I highly doubt you even notice anything. Go ahead and record at full 1080p resolution so the picture will look the best it possibly can when you do play it on a true HD source.
BTW, the only time you'll really get lower quality looking video is on up-conversion. If you have an HD signal or recording that is at 720p and you are playing it on a 1080i/p source, you are likely to notice the lower quality. Honestly, though, 720p looks amazing as is. I can barely notice the difference between 720p and 1080i (I don't have a 1080p monitor, so I can't comment on how that looks). 540p is another story... that stuff looks like crap.
Second, can someone look into their magic 8 ball and tell me who's going to win the format war, HD or blue-ray?
I'm pretty sure BluRay will win the war. They are backed by Sony, which is a monster in the industry. Any movie that comes out of a Sony studio will only be released on BluRay.
On the flip side, though... Sony was the primary backer of BetaMax and look how that turned out. Not to mention that HDDVD is backed by a triumvirate of big companies (Toshiba, GE, and I can't remember the 3rd... HP?).
That said, I have a PS3, which has a built in BluRay player. I really don't care who wins. I will always have my BluRay player in my PS3... so if HDDVD wins, I only have to buy an HDDVD player. Also, it's worth mentioning that there is already a player on the market that plays both HDDVD and BluRay discs. All in one player. That right there kind of trivializes the competition. Both formats can be played on one device.