No, it really doubles (with interpolation) the rectangular window transferred from main memory to video memory. That way you can have some parts of screen with normal pixels and some with doubled. With 770 the destination rectangle needs to be exactly 2x, N8x0 can scale (and interpolate) in almost any ratio.

It is not related to clocks driving the display in any way, video memory in epson chip is always in full 800x480 resolution.

However from the datasheet it looks like the chip in N8x0 can suport half resolution but this feature is not currently used. If I understand it correctly one could than have more real 400x240 frames inside videomemory and let it double while sending from videomemory to the LCD. This could allow double buffering and solve tearing effect but can only work in fullscreen and is tricky to set up and then switch back to 800x480 once you exit fullscreen. Pixel doubling or scaling to full 800x480 is easier to use.