My friend who works as an tv editor and knows stuff about this kind of crap told me that there is a very little visual difference between composite and hdmi, however hdmi will have a better sound output if you have sourround sound speaker hooked up.
HDMI is much better, you wont notice the diffrence unless there side by side though. Theres a video on youtube with the comparisons that i watched when I was determining if I should buy the cable, cant find it or I would link it.
You don't have to buy an elite. The pros now come with HDMI outputs, as part of the new chipset they have. Now, the only difference between the elite and the pro is (and don't quote me on this, im 99% sure im wrong, and I'll probably be flamed) the HDD and color. Personally, I would get the elite, because I've noticed faster connections for people with elites, and you get to be the host more often.
As has already been stated, HDMI is superior. The video quiality you get from it far surpasses that of component. I noticed a big difference when I switched my PS3 from component to HDMI. My TV only has one HDMI port though, so I run my 360 on component. Switch boxes that have HDMI on them ain't cheap
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