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I love my 360, and my two young daughters (3 & 4) absolutly love Viva Pinata:

Little known fact about viva: 2 controlers work togeather. Give your child one, you hold the other. You can both control the cursor. It's kind of like student driving in a car with two steering wheels.

Graphics & Gears: Everyone who is underwhelmed by Gears and other 360 titles apperance that I've spoken with are all running on SDTV. I suspect you are as well from the brief description of your set up.

I know HDTV's are very expensive, but if you want a taste of what it can look like, grab the 360 VGA cable it and plug it in to your computer monitor. Then crank up the resolution and enjoy.

After about 30 minutes, thoughts of how to save up for a reasonably sized HDTV will start to flow through your head.

Enjoy!