I had this dilema when I first bought my Samsung 61" DLP with 1080p support. I didn't realize that my 360 didn't have HDMI support. After researching the matter, I discovered that there are three ways to get a 1080p connection with the 360, two for playing HD-DVD movies.
1. The first method are the standard component cables. It won't work for HD-DVD movies. No matter. Even with games, you're better off using 720p or 1080i in this mode. The system upscales to 1080p resolution but the framerate suffers. I tried this setup first. The graphics were great but the motion was kind of grainy. Given that my prior TV was a 20" SD, they still looked spectacular.
2. HD-VGA component cables. My TV doesn't have output for VGA component cables so I've never been able to test these. From what I understand their quality output is identical to...
3. HD-VGA p sub cable. This is what I use. There are actually two of these on the market and its confusing which is which. Last time I checked, Amazon.com actually had the two products swapped. The one labeled 'HD' can only output at 720p. The second one (which says 1080p on the back) is the one you want. When I first plugged this in and did the proper system config on my 360, I noticed that the framerate on 'Halo 3' had nearly doubled. It looked as good as Ninja Gaiden Sigma on PS3, which runs at 1080p/60fps through my HDMI connection. NGS looks about as good as anything out there. However, my Blue Ray discs look just a wee bit better than the HD-DVD stuff. Although that may be the quality of the disc masters. The Fountain (HD-DVD) and Fantastic Four: Rise of the Silver Surfer (BR) are the two best looking films I've seen on the two mediums respectively. I can't really say one looked better than the other.
I can't really imagine an HDMI connection improving my connection in any visually discernable way...
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