I've determined that a 32" widescreen TV is about equivalent to a 27" standard TV. That is to say, if you played a DVD formatted for a standard27" TV, that would be the same size picture as playing a widescreen format DVD on a 32" widescreen TV. The height would be the same, but you'd simply have a little more video on each side of the "main picture".
A jump up to 42" is nice, but going bigger does not get quite as big as you might think. Don't discount anything in the 45-47" range, if you can afford it.
I think you can get that in a 45-47" nowadays.
Personally I'd go ahead and go with 1080p, which is the "new HD standard" so to speak. Having said that, I don't really know how much difference this will make on the smaller sizes like 42".
I've tried to answer that question for myself and haven't been able to. It seems plasma is a little more expensive than LCD, but I haven't been able to justify the difference yet. Some say plasma is better, some say not.