Very little difference in picture quality between component and hdmi. HDMI is not neccessarily better.
The big deal about HDMI for HD DVD playback is audio. The new audio formats can not be sent over digital toslink or coax. They can only be sent via 5.1 analog outs (which the xbox 360 lacks), or sent as PCM over HDMI. The biggest downfall of the xbox 360 as a hd dvd player is there is no ability to take advantage of the lossless soundtracks, or even the higher bandwidth DD+. Dolby TrueHD and even DD+ are both huge improvements over regular DD/DTS.
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