Well.
Here is a link explaining what Interlacet and Progressive is when it comes to TV.
http://www.doom9.org/video-basics.htm
If you set aside what resolution you use, progressive is better quality. But in this case going from 480p to 1080i and you have a HD-ready viewing device I would say 1080i is best, since it give a larger picture and more detail.
If you put it verry basic, interlaced is when frames are blended together and progressive is not blended together.
Anyway read the guide if you wan't to get into it. There are lots of other usefull information stuff there about Hz and so on.