Just a quick word here as I've already made some of my thoughts known in the HD-DVD hardware threads on this.
I own both a Toshiba XA-1 and an MS HD-DVD drive and I see very little, if any difference in the image produced by each (which is a bit surprising since I expected the HDMI output on the Toshiba to give it a bit of an edge). The sound, of course, is a different issue because the MS unit is limited to S/PDIF digital output with no provision for 5.1 or 7.1 analog output (nor HDMI) for the potential of some of the newer codecs. However, once again, the sound is certainly close enough (both sound good to me) to belie the fact that one unit lists for 5 times the other.
Incidently, I should explain that I feed the video output of both the 360 and the Toshiba units through a $3000 external video processor (a DVDO iScan VP50) and from there into a 1080p (native input) capable display so this probably is a major factor in making both images look so good and so close in quality. The fact of the matter is that if you have a good 1080i source then deinterlacing it to 1080p with a state of the art algorithm (which the VP50 provides) will yield an image that is almost impossible to tell apart from a native 1080p source.
No, I'm not suggesting that people run out and purchase an expensive external video processor just to make their games or their add-ons look better but since I subscribe to the "component approach to A/V" (you can read all about that
here if you're curious) this is just another bonus of having a separate video processor in your HT arsenal. (As a matter of fact, another benefit came to my attention today when it was mentioned by some that the new PS3 presents a problem if your display can't accept 720p input from 720p games. With an external VP, this is a non-issue since the video processor can make all the necessary corrections for you.)
