Everyone has a different idea of what acceptable quality is.
In my house, my bedroom tv is used for watching garbage before I go to sleep (Law and Order, History Channel) and watching Sunday NFL Countdown on Sunday mornings before I decide to get out of bed. 120hz would be nice in general but doesn't really add much to that kind of programming.
If you plan on watching a lot of movies or sports in there then by all means splurge for 120hz. It is rare and a premium feature on 32" sets though.
At 32" I wouldn't even care if it was 1080p. Nothing coming in from the cable company is 1080p and at that screen size the extra detail would be hard to see even if it was there. The price difference between the two is so small now that I'd probably kick extra for 1080, but it would be hard to tell the difference.
Toshiba LEDs are nice - nothing spectacular. I wouldn't mind owning one in my bedroom but I'd probably go a different way for my living room.