Procrastinato said:
^^^ The PS3 upscales with a combination of hardware (vertical) and software (horizontal), as I recall. Frankly a lot of people would say the PS3's upscaling has better output than the hardware upscaler in the 360, especially for DVDs. Probably has something to do with a custom scaling algorithm that's not just built into a cheap off-the-shelf component.
That being said, if you tell a PS3 that a certain resolution is supported on your TV, but you don't like said resolution... why don't you just disable it as an option for your gaming?
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The 360 scaler is very high quality and works 100% with all games. Upscaled DVD doesn't look all that good on the 360 because the playback software (not the scaler) is crap.
The 1080i/p software scaling quality on the PS3 is sometimes on par with the 360, but often it looks considerably worse. And half the PS3 game library doesn't support any kind of scaling at all. If I disable 720p in the video menu, then games like Valkyria Chronicles, Heavenly Sword, and Uncharted (PAL version), will only display at 480p. There's no way to force these games to display at 1080i/p.
Typically games that can be forced to run at 1080i/p (by disabling 720p in the video menu), looks blurry and low res. Games that list 1080i/p support at the back of the box tend to look fine.