alright, dug out my HD-DVD drive and some discs to test this out.
When I first inserted the HD-DVD, it didn't launch. I couldn't find any HD-DVD player in the new dashboard. So I went to settings to re-enable autoplay which I usually leave disabled. Then I reinserted the HD DVD and it autolaunched.
Now, under the apps, there is an HD DVD icon. I disabled the autoplay feature again and now I can insert the HD DVD and launch the movie manually.
I tested Transformers, I am Legend, Happy Feet, and The Matrix. Movies just as beautiful as I remembered them.
The 360 really does a nice job with them. I think I prefer the functionality over my Toshiba HD-A30 and Toshiba HD-A2 players. I'd have to boot those again and compare image quality (which I'm not going to do).
If anyone's curious, no, there is no Kinect functionality (as expected) for the HD DVD player. Had to bust out the media center remote again. How retro...