I have downloaded "HD videos" from the Xbox Live Marketplace and quite frankly I’m not impressed with the "HD" look. So I am wondering if its going to be the same quality that i will get with the Xbox 360′s HD DVD player dvd’s.
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It depends. It won’t be exactly the same. In theory, HD DVD can be better quality. HD DVD content is generally 1080p resolution and encoded with high bit-rate VC1. The Live Marketplace "HD" videos are 720p (also encoded using VC1, at a more conservative bitrate) and extremely high in quality. (They really have the best quality of any online video service.) I’m not sure why you wouldn’t find the Marketplace HD video impressive. Are you using a modern HDTV display?
The extra resolution of HD DVD will benefit folks with larger 1080 capable HD displays, but 720 and 1080 are both considered true "high definition."
I think it could go up to 1080p and higher HD settings