Ok I want to set some things straight here. I have a Pioneer Elite 151, and when I set the hdmi color space to source and play any 360 game myTV is detecting a RGB signal with 16-235 color space. People need to stop saying the games are in pc color levels, it is simply not true. When I set it to hdmi auto it does the same thing. When I play a HD-DVD movie with source selected the movie plays at YCRCB REC709 with color space 16-235. Now lets look at the reference levels since most people on here are not using this correctly as well. The only time you have to use expanded is if you have a television that expects PC levels, and there are only a few displays that do this, Particularly the first 1080p sets to accept 1080p thru hdmi. Mitsubishi was one display that when fed a 1080p signal with hdmi or vga would look for a 0-255 signal and if not fed one would be washed out. Samsung displays have pretty much been the most versatile in handling both 16-235 and 0-255 from the get go.
The only reason for this is Samsung worked with Microsoft on launching the 360 and had the inside track on what the 360 output color levels were going to be with VGA. I Recommend everyone to set the hdmi color space to auto if your not sure what your display is looking for unless you have a display that you know for 100% can handle any source, then set it to Source. Source will do the least amount of conversion and should yield the best image and reduce lag.
Reference Levels should always be set to standard unless you have an older display that does not accept hdmi at 16-235, or if your using a PC monitor.
There is no reason to use expanded on a TV, and there is no benefit to it.
Infact setting to expanded will on most tv's cause black crush, but even the ones that accept expanded without black crush usually have other errors in color you cant easily detect without knowing what to look for or using a test pattern. For example, my Pioneer Elite 151 will accept and show Expanded from RGB or YCRCB with what looks like a correct image until you look closer, and notice white crush at the very top IRE's. On some displays you will even get Chroma errors by using expanded. Standard is the correct setting to use on 98% of all digital displays that are not computer monitors. There is no difference in image quality on a display that is doing both correctly.
The reason vast amounts of disinformation was injected into consumers regarding color spacing and reference levels was the mistakes Microsoft made with VGA " Sending Video Levels instead of PC when hooked up to a Monitor" and Sony " Sending PC levels thru Hdmi when hooked up to a TV". Both of these mistakes have been fixed finally. So let me repeat there is Zero benefit to using Expanded on 98% of TV's. You should always use auto for hdmi if your not sure what your TV is capable of "if your display can convert RGB to YCRCB without chroma errors". If you have a display that does this correctly setting to source is the best option for image quality and reducing lag.