I'd go plasma. Long answer follows...
I have a 42" LCD 1080p. Sharp as a tack, but SD looks hideous (and most channels are SD). Also, almost nothing is 1080p, and might not be so for a long time. Maybe next gen systems, maybe not, but even then that's a long ways off. If it saves you cash, going 720p would be a better idea, and from what I hear Plasma does it better. The tech is way better than it was when it started, the shelflife is the same, and picture quality is usually better overall (particularly color range).
Something else to think about is that stores actually fidget with picture quality to move more expensive sets, which are usually LCD. There was a piece on Cnet about just that, so if you're going to a B&M don't be afraid to play with some settings.
Plasmas always start at 42" and are generally cheaper overall in that size group. 1080p at that size IS NOT noticeably different in quality from 720p at a normal viewing distance, and again I stress that there's almost nothing that supports 1080p right now anyway. It's just more expensive, and so it's about manipulating consumer perceptions. Kind of like those gold plated cables people try to sell as being better, when in fact the difference is negligibly worse (gold is not as good a conductor).
/end wall of text