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I think a lot of people fail to realize how bad is the 360 version, it's almost half the pixel rendered

1024x576= 589 824 pixels

1280x720= 921 600 pixels


In termes of definition it's a massive downgrade. Bayonetta was nowhere to be as bad since both games were running in 1280x720 with no AA on both consoles. The main différence was the lightning and filtering.

The problem is not disc space here, it has nothing to do with it. Disc space (and mandatory HDD) could be an issue in the game design process of the game, how it was built, the path, etc..but not the resolution.
Rendering resolution is more a framebuffer problem, probably SE tried to fit the framebuffer in one pass in the small 10MB of eDRAM of the 360, without tiling, so they couldn't go further than this resolution + 2xmsaa.