What kind of TV are you using? I have a Pioneer 433CMX plasma and I've been feeding it 720p. I've gotten it to play DVDs scaled to 720p, but a couple things: scaling artifacts and lots of hassles with aspect ratios. Hopefully they can resolve that stuff, as well as get proper DVD menu navigation working.
I read that the Conexant video encoder chip in the Xbox has a maximum internal resolution of 1024x768 - it scales it to 720p or 1080i. Maybe that has something to do with the scaling artifacts.
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