Microsoft was bashing full HD support all the time now their marketing team apparently got the upper hand and the Xbox 360 gets 1080p support via a software update: Eat this Sony PS3 marketing!

If you could add a HDMI port to the Xbox 360 via software update Microsoft would do it. I still think that was a major mistake for Microsoft not to add an HDMI interface to the Xbox 360. Even with 1080p support you will not be able to watch HD DVDs in 1080p resolution because that only works via HDMI.
Microsoft still does not want to produce games in full HD resolution. So it is just an upconverting feature that is interesting for people who have big screens with 1080p support on their component video port. Via Arstechnica and Joystiq.
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