OK, did a little experiement last night:
Set the screen to the optimal resolution setting, which outputs 1360 X 768. Set reference levels to expanded. Looked great, but I could see the jaggies a little more. For some odd reason, when using this PC resolution, the color saturation seems bland, and I have to turn up the saturation to about 65. Also, the reds don't look completely red, they have a pinkish hue.
Then set the screen to 720p, standard reference levels. Colors immediately looked better, more accurate. But I do feel the blacks and grey look deeper with the PC resolution and ref levels set to expanded.
Finally, went back to 1080p, standard ref levels. Noticeably sharper picture, because all the pixels are so tightly packed together. Less jaggies, smaller and sharper text, lines etc.
Note: only 720p and 1080p has the option to switch between 1:1 and normal pixel mapping. I always go with 1:1. In PC mode resolutions, all additional settings and enhancements are greyed out.
Observations:
1080p without a doubt, looks the best. 1080p and 720p exhibit better color overall, as opposed to 1366 X 768. The latter, however, exhibits slightly better blacks and greys, but only slightly. Also, both the non-1080p resolutions seem to display better motion resolution, so you get more crispiness and detail during movement. But only by a small margin.
I play with all enhancements off, 1:1 pixel mapping. It's a 40" screen, in all honestly 1080p really does look the best. At no additional cost I might add. No input lag, no motion lag, no anomalies.. nothing.
Just go with the native resolution of your TV, in which case, it's usually the highest resolution your TV supports. Don't worry about upscaling, as the X360's scaler chip (ANA), is one of the best there is.
Cheers
