the 360 does upscale with both vga and hdmi-to check play a dvd and press the info button on the tv remote-somewhere it will tell you how many lines on the screen it is using so if you have 1080p is should say 1920 x 1080, if its a 720p tv then is will say 1280 x 720 or 1360 x 768 with vga!!

if it doesn't make sure you've set the xbox to the right setting-go to the last blade, console settings, and then display and change the settings to the max your tv can do-this isn't just with dvds its the same setting for games or whatever else you're doing

-if you're using the component cable make sure you've set the switch on the cable to hdtv (still doesn't uspcale dvds though)