Yes. It's fine.
720x480 is an SD resolution.
New HD sets (HDTVs) simply upscale the SD to it's native playback resolution.
Because SD upscale software looks terrible by comparison, and hardware upres'sing is always improving, SD content should almost always be left as SD. Let the TV handle the HD conversion.
Keep making your DVDs of older TV shows at 720x480.
Save HD 16x9 menus for Blu-ray from HD content. And, of course, plain streamed H.264 doesn't even need menus.