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[twistedsymphony]

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Xbox 360's can playback DVDs at 480p (most dvd's are already 480p, no up-scaling required).

If you use VGA or HDMI (only on elite consoles) your Xbox 360 can upscale DVDs to 720p or 1080i/p.

Technically it SHOULD be able to do this over component but the MPAA has set regulations in place to prevent companies from doing this. They fear that people will rip the upscaled signal over component video or some other BS. As a result the highest resolution you can output DVD's at using the Component video is 480p.

The HD-DVD drive makes no difference in this reguard.

If you use a VGA cable on your 360 and then a VGA to Component video transcoder then yes,  you can get DVD's to output at 720p or 1080i/p


Might I suggest some alternatives?

-Buy an Xbox 1, mod it and install XBMC... XBMC can also upscale DVDs to 720p/1080i over component video too (because they don't give a sh*t about MPAA regulations)... 1080i is a little flakey because it's pushing the Xbox's limits but 720p works beautifully.

-Buy an OPPO upscaling DVD player. Hands down the best upscaling DVD player on the market, it's made by a small Chinese company IIRC but they also don't care about MPAA regulations giving you 720p/1080i upscaling over component video, or even HDMI.  

The best part about OPPO DVD players is they use the faroudja DCDi processor for upscaling, which is the best upscaling processor you can get for converting 480i/480p to HD. WAY better than what the 360 can do and WAY better than what XBMC can do... it's even way better than 90% of the other upscaling DVD players on the market.

As for me, I used XBMC to upscale my DVDs for quite some time, and I recently bought myself an OPPO dvd player... the thing is friggin awesome and worth every penny.

The 360's DVD player functionality blows... I have a cheapo $50 no-name brand Walmart special that plays DVDs better than that.