VGA if the display handles it well. Not all displays handle VGA signals well, so sometimes component is better. Then again, most HDTV's don't accept 1080p over component, then maybe VGA would be better in that situation. It really depends on what HDTV/display you're using.
A friend of mine has a 720p Samsung 40". We compared VGA vs component on his TV, VGA gives a much better picture, at least in the 360-menu. That was with the original Microsoft VGA-cable. We tried a third party VGA-cable, the picture was the same as with component, don't know why... It seems that the official VGA gave 1:1 pixel-mapping on that particular TV. I use component on my 1080p TV (there is no VGA input :( Luckily, my HDTV supports that resolution over component), let's just say that I can't wait for the HDMI-360 to come out...
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