It was said that iPhone 3GS had 720p too, but in order to save on the battery juice, they had to do it.
Xda developer’s user CharnSingh has unveiled a mod/update that lets you raise the limtis of the video recording to something that looks good on the eyes: 720p HD. The update (unfortunately) is currently limited to Android 2.1 eclair and would not work for Froyo, but the update should be coming some time soon. The mod works only on Rooted Nexus One phones. To get the mod to work you’ll need to be running Cyanogen’s CM5.0.8test3 and up.
Works with intersect kernel. Here is a 720p video Demo: