When the "Don't Exceed 100%" box is off small clips like 720p will be scaled up to the percent of screen size you selected in the basic settings. Scaling up will result in a fuzzier image often with rough edges. It will also require more processing because additional pixels must be created for the larger image. If you like the result there is no reason not to do this.
My main display is 4K and my usual single card scale is 75%. With these settings 1080p cards look a bit fuzzier than 3K cards and, for me, 720p cards are ***** fuzzy. On this display I only play 720p cards as part of multi-card (small scale) groups with a setting of 25%. Even then the 720p cards are a bit fuzzy.
Once as an experiment, I stood my 4K monitor on edge in portrait mode and played some 3K cards at 95%. The images were spectacular, but I could detect a small amount of bluring.
I play all my cards with the "Don't Exceed 100%" box off, but I have a relatively new and powerful computer with a good graphics processor.