The Mitsubishi HC1600 does a great job on sharpness. Very sharp images is almost a Mitsubishi trademark, compared to most of the competition, and the 720p resolution HC1600 is no exception. While no 720p projector will provide as detailed an image as even the softest 1080p projector, when fed a 1080p source, the Mitsubishi comes across as sharp, even on my largest screen - 128" diagonal, even sitting reasonably close (less than 12 feet).
I've got two sets of comparison images for you, the first is a close up of the DTS logo and text from their demo disc. The second is a closeup of a computer monitor from the movie Space Cowboys (both are from Blu-ray disc, 1080p resolution).
Top Left: Mitsubishi HC1600, Top Center: Panasonic PT-AX200U, and Top Right: the Optoma HD65. The second row has the Epson Home Cinema 720 on the left, the Optoma HD71 in the center, and for a change of pace, the Epson MovieMate 72, the only 720p all-in-one projector (with built in speakers, amp, and DVD player). The complete MovieMate 72, sells for a few more than the HC1600.