72,
I just got finished with an Xbox session tonight. Here is a quick rundown.
A few games support widescreen and most Dolby Digital; but none-yet support HD. Everything runs at 480p except the openning credits which is 480i. The LT150 syncs pretty rock-solid with the input I saw some slight "flickering" in one of the demos on the Halo disk but that was all in about 6 hours of use and that could have been due to the source.
Here is my general set-up with exceptions noted below.
Brightness : 3 clicks up from 50%
Contrast : 60%
Color: 60%
Red contrast : 3 clicks up from 50%
Green contrast : 2 clicks up from 50%
White segment: on
Gamma: Natural 2
As you can see the output of the X-box is a little dark for my tastes. (This is typical of a lot of games and game systems out right not - "Cool dude, this game so dark! It so wicked that I can barely see anything" etc...

) The above settings will very "slightly" wash out detail in brights scenes; but it really helps you make out details in the dark scenes. A small number of games have an adjustable gamma setting but I didn't play around with that.
Individual settings and my initial ratings of the following games are below:
HALO:
4:3 Aspect ratio only
Awesome Dolby Digital - A little more low bass like Quake III would be nice.
Very smooth motion even in 4 player battle.
As a bonus, a very playable demo of Fusion Frenzy comes with it.
9 out of 10 initial rating.
PROJECT GOTHAM:
4:3 Aspect Ratio only
Decent Dolby Digital but could be better
Dark Images! I had to put the contrast up to 70%
8 out of 10 initial rating
MADDEN 2002
16:9 aspect ratio support
Good Dolby Digital
Pretty good graphics but only PS2 quality.
I am still getting used to the controls.
8 out of 10 initial rating.
DOA3
16:9 aspect ratio support
Good Dolby Digital
Excellent graphics
If you like fighting games, this is your game.
I did see some rainbows on occasion with this title; but not much.
Don't quote me but I think the last two games are the only two that support widescreen currently. You set-up the Xbox to output 480p either widescreen (when available) or 4:3 only. You can also tell it wether or not your TV supports 720p or 1080i. This isn't important now but will become important when HD games like Test Drive come out.
I believe these are also most of the Dolby Digital games currently available. Like I mentioned overall the Dolby Digital was quite nice but it didn't have a whole lot of 40Hz and lower stuff.
Well that's my review. I really think the product is worth it and I can safely say I severly doubt I will ever play a game on my HTPC again. It is strickly for movies now. No more hardware compatibility issues and I get Dolby Digital sound (Dude!!!)
-Mr. Wigggles