Yes, you are missing something. While 1080p would be the correct resolution for my display, 60 hz is NOT the correct frame rate in many situations. About half the content I watch is 24p, and should play out at 24 hz.
Instead, setting the WDTV to auto results in an output of 720p for most content save for 24p video files. 1080/24p streams from services like Vudu show at 720p60. That is completely incorrect.