Opps my bad, I've jsut read 'THE' article and it says that the xbox360 will most likely scale 720p up to 1080i Of course, it will upconvert the resolution better than your tv wouldm so I guess we should be fine.
I doubt that gaem devs or MS will ignor 1080i though. I meant, it's just not practical enough to just upconvert 720p to 1080i if the upconversion will be low quality. If it is a good upconversion, then I will be happy, but a native 1080i would be alot better if it provides better quality over what the upconversion looks like.
I should hope it's a high quality conversion... considering most people who will buy next gen consoles will not have HDTVs most if not all of what they see will be filtered through the converter.
As for not supporting digital... it really depends on your display. As far as I'm concerned CRT and Plasma based displays don't benefit from a digital signal the same way LCD and DLP displays do.
MS went after component because ALL HDTVs support component or some derivative of that... only newer displays support DVI or HDMI. I have 3 projectors only 1 of them has a DVI port, though all three support component, none of them have HDMI.
I understand MS's logic in that component covers everybody, they're not making their system very future-proof by passing up digital video.