Upscaling DVD player.
The 360 is a terrible upscaling DVD player. The upscaling hardware in the 360 is just very cheap in general, so you probably won't even be outdoing a $50 mainstream upscaling player. You'd be better off using a cheapo $100 player, by far.
An Oppo 981HD is a very recommended choice. Great upscaling player for the money. I think it's around 200.
If you want the best of the best (which I don't recommend at this point, what with HD media and all), then the Denon 2930CI and Denon 3930CI are some of the best players on the market (you can get them used for probably around 500 and 1000 respectively).
If you ever plan on getting a PS3 however, it's also a very solid upscaling player (scores around the same as the Oppo 981HD, though I still say the Oppo is a tad better). Since the PS3 is somewhat affordable now, it's a solid choice, and plays Blu-Ray. Though, since it has a fan, it will generate some background noise, so if you're anal about that, you might want to look elsewhere (though it's still much, much quieter than the 360).
Subarushian said:
It can't be that much better than a VGA 360 (which I think looks very good) to justify spending $300 on one.
Oh yes it can. By the way, you know when you compare screenshots for PS3 games and 360 games, and the PS3 games always look washed out in comparison? That's because the PS3 is outputting the games as what they should look like, and the 360 really, and I mean really, oversaturates the entire picture. The 360 has abysmal component-out.
Though I forgot to mention, if you go PS3, make sure you hook it up through HDMI, since the PS3 does not upscale through Component, and it does not have the greatest analog output.