Hi,
You can do 1080p over component cable, but there is an exception to this. If your tv has hdcp (Hi definition Call Protocol) then you need what is called a secure connection to get 1080p and component is not secure as there is a possibility of signal loss or corruption so you can only do 1080i.
I have a 24in dell lcd monitor that has component inputs but is a hdcp monitor so I can only get 1080i, whereas a mate has a cheap 24in lcd and it isn't hdcp and he can get 1080p on it.
I tried a vga cable and it made the colours washed out and it looked a lot worse than the component setup did. This is because my lcd is a high colour unit as well.
I set my console to 1080i when I got it a year ago and haven't needed to touch it since. There are a few games that look crappy in some scenes, but that isn't too big of a bother.
currently I am thinking of connecting my 360 to my new 40in sony bravia lcd tv to see how it goes. but trying to con the wife into letting me buy a new 360 console that has hdmi output first.
Anyway, stick with 1080i and you should be very happy
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