AVS Special Member
Join Date: Sep 2000
Location: Los Angeles, CA
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1) First, HDMI can supply limited power to a device. That's probably why it still works with the power supply unplugged.
2) HDCP may be kicking in. If the source device sees a non HDCP compliant device in line, it will downrez to 480P. It doesn't matter if the second device is 1080P capable.
3) It is a lot simpler in hardware to convert 480p to 480i than to down sample 1080P to 480i. Your low cost converter may be telling the source to output 480p to make it's job easier.