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I tried a high bitrate 720p video on my XBOX (not 360) and it displayed like a very slow slideshow.
At that point, I knew I would need something for HD video's and the PS3 sounded perfect.

Now, having said that, the XBOX is excellent for DVD style video's, and I wasn't expecting the 2001 XBOX to handle a full blown 720p video well. But it got the ball rolling in my head.