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^^^ The PS3 upscales with a combination of hardware (vertical) and software (horizontal), as I recall. Frankly a lot of people would say the PS3's upscaling has better output than the hardware upscaler in the 360, especially for DVDs. Probably has something to do with a custom scaling algorithm that's not just built into a cheap off-the-shelf component.

That being said, if you tell a PS3 that a certain resolution is supported on your TV, but you don't like said resolution... why don't you just disable it as an option for your gaming?