The 120 and 240hz settings aren't allowing your games to run at a higher frame rate natively. What happens on higher end TV's (like yours) is, it takes a 30 or 60 fps source, in this case your game, and then interpolates and creates new images in between the native frames, to make it appear more smoothly.
Lets say you have a video feed of a ball rolling across the screen. Here are two frames:
[_O_____]
[_____O_]
What the 120 and 240 settings do, is create more frames in between by analyzing the before and after images... so you get:
[_O_____]
[___O___]
[_____O_]
or even better:
[_O_____]
[__O____]
[___O___]
[____O__]
[_____O_]
The more frames you have, the smoother it looks. The problem with this is that, because the TV (NOT THE CONSOLE) creates the new images, those new images often have flaws. Especially with the extremely "jaggy" and low image quality console games we have today. The created frames will look worse.
Unless the next gen brings more 60fps games, you won't see a frame rate increase. 120fps is used in maybe a couple games, and one of those is Super Stardust HD on PS3, and that's only because of 3D.