Well, yes and no.
The screen with it's resolution of 1680x1050 is capable of playing 720p HD content natively (1280x720) but for Apple to affix the "HD" moniker it needs to be capable of playing 1080i/p content at it's native size (1920x1080) which it cannot.
It can play 1080i/p content but scaled down to fit the screen.
The 24" iMac can play 1080i/p content at the correct size.
HD is all about the resolution of the screen, not whether the machine is capable of playing back the content. All iMacs (even the cheapest one I believe) are capable of playing back HD content, the 17" and 20" can play back 720p and the 24" 1080i/p but they all have the ability to scale down the image to fit the screen.