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I think it's a given that the XBox2 will play these movies (and convert to at least 720p and 540p).

The native resolution of the 'Motown' disc that is in the same format is only 1024x576p. With D-VHS and probably Blu-Ray headed towards native 1980x1080p playback, I'd say Microsoft better go back to the drawing board. Watered-down red-laser HD on DVD can't be missing over 2/3 of the resolution...