The real question is can it actually do anything at that resolution. A Radeon 6450 can support 2560x1600; that doesn't mean you should expect to be able to do anything amazing with it.
The original Xbox got be back into console gaming following my dissillusion with the Saturn and moving to PC gaming. Highlights include: Psy-Ops: The Mindgate Conspiracy, Chronicles of Riddick: Escape from Butcher Bay, Phantom Dust, Burnout 3: Takedown.
They sell HDMI switches that have multiple ins and include an optical audio out as well. That would probably get the results you need, but you'd probably be looking at 50+ dollars for a decent one. It is a shame that many TVs decode the audio from their HDMI in and then only send stereo out over optical... a shame.
WHy would that be the case? The port works fine from tv to reciever, and xbox to reciever from optical out. It's only when I use hdmi to tv, optical from tv to reciever that it fails.
Gamefreak1296
If your setup is 360 -> hdmi -> tv -> optical -> receiver, many TV's don't do full pass-through audio from hdmi to their optical port. They expectation is (generally) that you run all of your sources to the receiver then the video passed from the receiver to the TV.
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