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[brandogg]

The HDTV settings are always "not faded out", or at least they are since a dashboard update a long time ago, at least if you're using a component cable. Are you sure there isn't a switch? It would be right where the cable plugs into the 360, on the bottom (if your system is upright), or on the right (if you system is horizontal), if it's anything like the official cable. If it's switch-less, then it's most likely a defective cable (probably why it was $1, since it's like $30 in stores), and there's probably just a loose/missing wire inside the socket.

[brandogg]

The switch doesn't change between composite and component, it switches between 480i and 480p+, ie: you can use the component cable at 480i with the switch set to "TV".