The source is done for specific native resolution, your TV has a 1080p resolution. As long as your TV is good and the source is good you'll receive a good end result.

I know the 360 itself scales well as does the PS3. As long as it's a decent TV and the resolution is the TV's native the picture will be fine.

Almost all games are not native 1080p, i thnk the 360 only has two games that are native 1080p, and one of them was a basketball game. Halo3 and CoD4 do not even have a native resolution that reaches HD levels, Halo is 640p and CoD is 600p. 

I must say that after having played about 15 hours of Eternal Sonata on SD and then re-playing about an hour plus 2 more in HD, High Def is beautiful and Eternal Sonata is a gorgeous game. Everything is just so much brighter, crisper, sharper, and more beautiful in general in HD. I don't know the native resolution of ES nor do I really care. Beautful game... Bioshock is pretty damn good, too.

I traded in my Gears a while back so I can't comment -- I need to rent it and COD4 and check things out.

Is COD4 currently the best graphics on the system?

Congrats. I have the same tv and love it. If you have a computer hooked up download some 1080p content(legal stuff, of course :)) That will give you a tastes without jumping into the HD-DVD or Blu-Ray. I put an upscaling dvd player on it but don't think it is worth it because the tv's scaler seems to do just as well.

 none of those games are native 1080p.  there was a firmware update a little less than a year ago that allows the 360 to upscale to 1080p, but very, very few games are native 1080p.  virtua tennis, pirates of the carribean 3, nba street: homecourt are the only native 1080p games out for the 360.

To the OP.  You absolutely want to use component cables with the 360 with composite you are only going to get a 480i resolution on your tv.  you would be just as good playing on a sdtv with composite cables.  if you have an hdmi port on your 360 I strongly reccomend using HDMI over component too, but since you didn't mention it, I assume you have an older 360.  with the wii, the max. output is 480p I believe.  component or composite shouldn't look too much different on an lcd with a decent interlacing system, which your sharp does.  

I think there are many games that are native 1080p now.

Here's how I check. Pick a new low end game, say Beautiful Katamari, notice that on it's home page it shows 720p on the right hand side:

http://www.xbox.com/en-US/games/b/beautifulkatamari/

Now pick a newer high end game like Assasin's Creed or COD4, notice it says 1080p.

http://www.xbox.com/en-US/games/c/callofduty4modernwarfare/

Now we know that Beautiful Katamari will upscale to 1080p, but the web page clearly shows it is native 720p. While COD4 indicates that it is 1080p.

The article that there are only "2" 1080p native games is relativly old, the new 1080p games are all recent (last few months)

So enjoy the high res folks!!

Kn, to answer your "What games look great now" question... a friend just picked up Assasin's Creed on the 360, and he commented that it was his pick as the "best looking game on the 360 to date".

When I had a 360 my 1080p display looked it's best when the 360 was outputting at 1080p, because usually the 360 does a better job of upscaling to 1080p than the display will. I used VGA though, so I don't know what component looks like.

No, it's similar to Halo 3. Things look very good but are probably just a notch under other games like Gears. Just like Halo, its biggest redeeming quality is the absolutely stunning lighting system.

I'll be playing Assassin's Creed tonight so we'll see if that usurps the crown.