The evidence is convincing, and as someone in the beyond forums pointed out, Halo 3 is running at a lower resolution that 1024x768, which people have been running with PC gaming for a decade now. Typically, I wouldn't consider this a big deal, but the Halo franchise is supposed to display the power of the Xbox product line.
Strength of graphics are one of Halo's primary selling points and Bungee stated that the graphics would look a lot better than the beta when it came out.
1280 x 720 = 921600
1138 x 640 = 728320
728320 / 921600 = 0.79
So with the lower resolution you have 79% as much sharpness/data to look at on the screen. It's not as trivial as you make it sound. What's worse, however, is that if you have a native 720p display 720p games (95% of the 360's games) will be unscaled and look awesome whereas Halo 3 will be scaled and look significantly less awesome.
