My 1983 720 has 27 1 1/8 tires and fenders. I built this from a frameset in 83. It is a little close at the seat stay bridge. I've thought about cutting the fender in 2 there.
My 1985 720 is all stock. It came with fat 27 1 3/8 tires.
I'm astonished how different the various Trek 720's are, and I'm not even talking about the later bicycle that reused the 720 number in the late 80's. The 720 I bought in the summer of '83 (frame made in '82) looked almost exactly like the one shown, was spec'd with 27" wheels; had the same seatpost cluster (the tops of the stays say TREK on them, right?), same color, etc. I too used 27 x 1 3/8 tires (which were not easy to find!) and even so fenders were not a problem. But mine didn't have cantilever studs. I ran 27" wheels on it until I moved to Germany in early '84, at which point I switched to 700c (wider availability there) which worked fine, but now my rear brake --Suntour Superbes-- didn't have enough reach. I fixed that with a Campagnolo drop pivot bolt.
So I'm afraid what's true of one 720 is not necessarily going to be true of the other. By the way, somewhere on the Vintage Trek site it says specifically that All Trek Bikes have English Threaded Bottom Brackets. Not so: mine came with Italian!