Hello everyone. Sorry for the late response. As I posted before, I was at a 2-day offsite with no net access (or time to use it!). Trying to catch up with all the questions asked.
Xbox 360 Elite supports HDMI 1.2 profile. For audio, you can select DD, DTS (at 1.5 Mbps), and WMA-Pro (Microsoft high fidelity multi-channel codec supported in some AVRs such as Pioneer). Since it is not based on 1.3, it will not support output of DD+ or TrueHD (even if it did, mixing would have been turned off).
PCM output is available but only for 2-channels (not 5.1). Please, please, don't say you don't like this. There is nothing you are going to say which we don't know
. Our goal was to provide a digital connection for video which people wanted for some of their TVs. And of course, single cable A/V connection. So if having analog video bothered you before, you can now use digital. If you lacked component/VGA on your TV, you are in business with Xbox 360 Elite.
Keep in mind that the spring software update for HD DVD substantially improves audio fidelity. Per above, you now have a choice of no less than three output formats.
If you are keen on having 5.1 PCM output, I recommend purchasing the Toshiba A2 player which after the price drop, will be much cheaper than Elite.
Answering other questions, both Xbox 360 Elite and current Xbox 360 units will have a spring (console) update which adds support for different video levels for VGA output (7.5 IRE vs 0). And as someone mentioned, using this setting you should be able to use computer monitors in addition to TVs with resolutions all the way up to 1080p with high fidelity and no issues with HDCP handshaking. So for current users, I highly recommend trying this update with your VGA connection to see if it does the job for you. Note that this is a console update and will work for both games and of course, HD DVD. The HD DVD software update is separate from this (and will be available on both Xbox Live and xbox.com).
On output video format, Xbox 360 Elite will perform a handshake and select the appropriate RGB/YUV settings over HDMI. You cannot select it yourself.
The spring HD DVD software update will fix all the lip sync issues that have been reported/we know of.
There is no support for the WMV-HD disc format but of course, you can put WMV files on discs and Xbox 360 will play them.