New Release - Firmware Version 1.04.22_B for WD TV Live Plus (3/8/11)

HDMI AUTO looks at the EDID Data for your TV and uses the highest resolution that’s marked as NATIVE in this section of the EDID data:

CE video identifiers (VICs) - timing/formats supported
    1920 x 1080p at 60Hz - HDTV (16:9, 1:1)
    1920 x 1080p at 30Hz - HDTV (16:9, 1:1)
    1920 x 1080p at 24Hz - HDTV (16:9, 1:1)
    1920 x 1080i at 60Hz - HDTV (16:9, 1:1)
    1280 x 720p at 60Hz - HDTV (16:9, 1:1) [Native]
     720 x 480p at 60Hz - EDTV (16:9, 32:27)
     720 x 480p at 60Hz - EDTV (4:3, 8:9)
    NB: NTSC refresh rate = (Hz*1000)/1001

 This is my LG TV, and note that 720P is marked NATIVE.  Even though the TV supports 1080p, and is a full HD panel.

When you play a 24p file, it switches to 1080p/24 because that resolution/timing is SUPPORTED, and it’s the only resolution that does 24p.   But 1080p/60 is NOT marked Native, so it will stay at 720p for all other material.