I wouldn't call it inferior. It's just different. The 720 isn't meant to be a heavy strummer. It's good enough for some people, but the 720 is built for the fingerpicker inside all of us. When strummed, it won't have as much response across the wide range of tones as a dreadnought will have.
I fingerpick on all my guitars, and it's nice and comfortable.
For what it's worth, here's a song me and a buddy recorded. I'm the first guitar to begin playing. It's fingerstyle with the MD60, with the fleshy part of my fingers, not fingernails:
http://soundclick.com/share?songid=7877097
Um, what he said.
In some ways, my LS6 definitely sounds better than my FG730S (and vice-versa). And before anyone says "no fair" comparing an L-series to an FG: they're both spruce over lam rosewood (albiet the L is Engleman), and are in the $300-$500 range.
Now, if I were in your shoes, I'd find it VERY hard to NOT buy the MD60 or MD80 (yes, even sight-unseen, and unplayed, first). Just too good of a deal to pass up. And this is coming from a true Yamaha fan.
Unless of course, you WANT the virtues of a lam-backed guitar (stronger, more stable, etc.). I mean, especially with the FG730S, it's not like you're really going to be compromising on the sound! In fact, my son and I just went to a local guitar shop today, and I played several Alvarez models (a few A's and a few M's). They (esp. the M's) were very nice (all were in the $500-$600 range, though some were acoustic-electrics). Maybe ONE of them was better (in some ways) than my FG730S, and the rest were about the same (and some worse, for various reasons).
But to give you an idea of how good of a deal the current Alvarez models are... the "same thing" in a Yamaha (all solid wood, from their higher-end L-series) would be the LL16 (Engleman spruce over rosewood) at $750 (and that's a VERY aggressive/reasonable price). The LL16 is maybe a bit nicer (ebony fretboard and bridge, rosewood, etc.), but with the Alvarez clearance, you could buy BOTH the MD60 and MD80 (and have TWO all solid wood gits), PLUS have enough left over for a take-camping-beater!