How bad will SD be with a 360?

I consider myself closer to the newbie end of the spectrum on HDTV-related topics. However, I have read several articles and posts as well as talked to some salespeople in the stores, so I think I understand all the basic differences among the competing technologies.

Here's a rundown of my current set-up:

• 30-32" (diagonal) SD TV set that is more than 10 years old but still works great; it only has composite and s-video inputs
• A relatively inexpensive but serviceable stereo receiver hooked up to a pair of old speakers (no clue of the wattage, but they can shake the house when cranked up)
• Game consoles: original XBox, PS2, and a Wii

I understand that if I get a big HDTV that my three consoles won't look great on it due to pixelation. However, at least the XBox has some games that can do 720p, so I would expect some games to look better, at least on a 720p HDTV. I assume pixelation would still be an issue even for those games with a 1080p set.

I expect to be getting an XBox 360 in the next few months (the Orange Box will be the primary cause, but Halo 3 and Bioshock will be in my collection early on, too, I'm sure). My fundamental question is this: How bad will the 360 (and these games) look on my SD TV?

I have been told that the 360 will actually look pretty good on an SD set, but am I selling myself short by not getting an HDTV? I will still be doing a lot (perhaps a majority) of gaming on the older consoles (everything is shared with the family, who won't be using the 360 so much).

I have also considered spending my budget on a home theater surround sound system instead, even though my existing speakers are fine (no surround though). So these seem to be my options:

1. Get a plasma or LCD with 1080p, which will probably delay the purchase of the 360 because it will break my budget
2. Get an HDTV that only does 720p and save some cash
3. Keep the SD set and spend the money on surround sound and more software
4. Save even more money by only getting the console

Clearly this is about balancing and determing relative values of different options. I am looking for advice to help inform my decision. In case it's not obvious from context, I am a semi-serious medium-core gamer who likes FPS and action/adventure games that tell good stories with high production values (or something). And I share my consoles with young kids and a wife who are more into "casual" games, at least for now. Oh yeah, we also watch a fair number of DVDs (just standard so far) and some TV shows on digital cable. I like NFL football, too (go Broncos).

Thanks in advance for any suggestions or guidance.

Thanks a lot for the replies.

This helps me understand how a 360 will look on SD, but how about the other way: Wii, PS2, etc. on an HDTV?