what's the difference if you scale your bitmaps to a different resolution than they are made or if some output or TFT hardware does the scaling? most TFTs will scale anyway if you dont render in their native resolution. this means, if you scale from your native 1920x1080 to a user decided 1280x720 and then it's running on a notebook with 1440x900, the image will be scaled twice. it might be better if you always setup this one resolution your assets are made for, and the display scales it to whatever resolution it's natively using.
so say if i set my native resolution as some really high and scale down will the scaled version look terrible? scaling up makes things look terrible. is this the same case as scaling down?
depends how you define 'terrible', there are several points that might matter for you,
-color correctness. if you scale, no matter if up or down, you're interpolating colors which are in srgb space, but you're actually doing linear operation, you need to transform them into linear space. it's called "to be gamma correct", internet has tons of text bout it so I'll won't repeat it e.g. http://entropymine.com/imageworsener/gamma/
-scaling down, you need to take into account the sampling theorem (in short, you should take twice the sample count of the source image to avoid moire effects) check http://en.wikipedia.org/wiki/Nyquist–Shannon_sampling_theorem you will find on the right the image of a downscale brickwall which you might consider 'terrible' if not done right
-scaling up, well you sound like you know it already
-motion, things might look 'ok' if you rescale them in a stil image, but once it's in motion, you might notice 'terrible' aliasing artifacts. imaging a fence in your native 1920x1080 resolution that is having one pixel gabs between the laths. you scale it down without filtering to 2/3 (->1280x720) and once you move, the holes will appear and disappear. you scale it down with filtering, you will get weird colors in-between the actual background and lath color. you scale it up to 2560x1600, you'll end up with a similar issue, the gaps will sometimes occupy two pixel, sometimes one pixel.
will using the hardware/tft scaler solve the issue? NO. BUT if you scale twice (in software and then with the hw/tft), you will likely get twice the errors. of you know what you're doing and you're sure the hw/tft won't touch your output, you might get better result with your own scaling. but if you are unsure, then prefer to just let the hw/tft scale once.
my 2cent ;)