Actually, MS has a reason for analog only out, it's just a dubious one. The TV encoder chip they're using will be taking whatever video comes from the game and scaling it to whatever resolution your TV supports. So lazy developers only have to code for 720p and the xbox will scale to 1080i for them.
If they outputted the signal digitally, whatever comes out of the GPU would go straight out. In this case, a lazy developer would program only for 720p and when this gets sent to a 1080i-only TV(there are a few), they get a blank screen.
As said above, this situation does not preclude a future digital output, but for the lowest common consumer, this will be an easier hookup that requires them to think less.