I posted this on the Xbox.com forums, so I thought I'd post it here too:
You still need to calibrate the Brightness (black level) setting on your display to get the right level for black without losing shadow detail (crushing blacks).
Another way to think of this - and it may be this and not "IRE" - is PCs use "levels" of 0-255. You've seen this if you've used Photoshop or other image editing software that lets you adjust the "levels" of pictures. In PC levels, or 0-255, 0 is black, 255 is white, and everything between that is gradation.
On the other hand, Video (TV, DVD, etc.) uses 16-235. 16 represents black, 235 is white, and between that is gradation. However there can still be information below 16 and above 235, which is blacker-than-black (BTB) and whiter-than-white (WTW). This information isn't absolutely necessary, but being able to "pass it through" (like in a DVD player) can arguably give a better picture because the display has more information to work with.
So, in the new level options, "Standard" is likely something like Video levels (16-235), "Expanded" is likely something like PC levels (0-255), and the middle one is somewhere in-between.
You need to look at something with a lot of black and shadow areas. I did a quick test here on my Vizio 32" LCD here at work that shows some of this:http://www.avsforum.com/avs-vb/showt...&#post10500367
You need to make sure that whatever setting you choose, "black" is the darkest level your display can produce, and areas that are supposed to be dark grey but not black can still be distinguished from black and show (shadow) detail.
Without a calibration disc, you can save and load up the first image here on your 360:http://mistermax.smugmug.com/gallery/429986#17263868
The dots on either end of the spectrum show 16 and 235, where black and white should be respectively. There shouldn't be any gradation below the "16" black point, but there should be gradation (shadow detail) above it. Otherwise you lose shadow detail. For 235/white, you don't necessarily have to crank up "Contrast" (basically the "white level" setting) because putting it too high can create banding in colors and lose detail in the white areas.
You can verify this by trying out different games or DVDs and see if the black areas appear grey. If the DVD has black bars (ie., a wider 2.35:1 ratio movie viewed on a widescreen TV), remember your previous Brightness (black level) setting, and adjust Brightness up and down to see where the black bars go from black to dark grey (may appear as dots of noise on certain displays). That should be where the "16" black level is, at least for that DVD and for DVD playback. You might need to try a few different sources to make sure you have the right setting or the best compromise.