A 720x480 movie lower quality, or a 360x240 high quality version?

i'm assuming you're talking about compression for playback on a computer? then you're talking about 640x480 vs 320x240. your question implies filesize is a consideration. if filesize is indeed an issue, 320x240 high quality should result in a smaller filesize than 640x480 at lower quality using the same format. that said, i would probably rather see a high quality 320x240 than an overly compressed 640x480. 320x240 high quality will look ok scaled up, but bad compression artifacts tend to stay visible scaled down.

Is it a question of transfer limits and storage sizes at your end, or concern for the user?

If its the latter, why not offer multiple streams? Those on a 300-500kbit line will appreciate a lower quality / lower res version, whilst those on a 2mbit+ would dig a higher quality one.