Ill try and answer ya questions to the best of me knowledge fella:
What does this actually mean?
1080 means 1080 lines are displayed on the screen. The resolution would therefore be 1920x1080, which if you consider 720 only displays 720 lines and EDTV PAL (SDTV) only displays 576 lines, then you will understand that it allows more detailed images to be displayed.
whats the difference between p & i?
P is progressive scan whereas I is interlaced. Interlaced renders 1 line every 2 lines, then renders the alternative lines once the first set of lines is completed. You would never notice it doing all this as displays run at in excess of 50Hz.
Prograssive scanning is different, whereby it renders the complete image at once. Progressive is the higher quality of the two and more common in TV sets, but it has the downsides that it uses much more bandwidth and when it de-interlaces an interlaced signal for display on a progressive tv set, the quality is lowered. It also runs a lower frefresh rates, so there is the question of future proofing, due to the different refresh specs of 1080 (1080p24, 1080p25, 1080p30, 1080p50, 1080p60 etc) but they shouldnt affect people to be honest.
If p is better than i, is 720p better than 1080i?
Yes and no, it depends how you look at it. In general however, 1080i will offer more detail and therefore better quality then 720p. If the TV is only able to display progressive scan, and the source is 1080i then it will not be as crystal as 1080p due to de-interlacing, but should still be better then 720p.
My HD ready 32" LCD has a VGA input, what res should I set my VGA out on my laptop to to get HD quality?
HD resolutions are usually 1280x720 for HD720 and 1920x1080 for HD1080.