I just wanted to chime in on this because I believe I am having the same issue as you are. Also, I want to point out that you mentioned the mode is validating, but let me remind you that you have the following in your xorg.conf
Option "ModeValidation" "NoDFPNativeResolutionCheck, NoEdidDFPMaxSizeCheck, NoEdidMaxPClkCheck, NoVertRefreshCheck, NoHorizSyncCheck, NoMaxPClkCheck, AllowNon60HzDFPmodes, NoPredefinedModes, NoVesaModes, NoXServerModes"
...and without those settings, I am guessing that it possibly would not validate your 1080i (540 upconvert) resolution. I'm also wondering without those options does nvidia invalidate it because the driver computes the refresh rate at 120hz.
Could you confirm/deny that, if only for the sake of clarifying the problem at hand?