Though recent reports site that with the Xbox360's VGA adapter the video encoder will be able to scale the game's resolution to any standard resolution from 640x480 all the way to 1920x1080.
So if your monitor supports 1280 x 1024 and you have the 360's VGA cable you'll be able to output at that resolution. Also much like the current gen Xbox (except now supported throughout ALL games, not just select games) you'll be able to choose fullscreen, widescreen, or letterbox for your output.
Any references for this, twisted; particularly the 360 scaling to different res's on a computer monitor? That would be awesome if it upscaled 720p to 1280 x 1024 or 1920 x 1080. I would just like to read more about this.