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according to the tech specs on the Vizio site online my TV supports 480i (SDTV), 480P (EDTV), 720P (HDTV), 1080i (HDTV) http://www.vizio.com/vo320e.html
The 360 upscales to 1080p if your TV has that capability, usually from a 576p or a 600p (sometimes even a 480p) resolution source. I'm guessing your TV is small, probably like a 26" or a 32", and if you are sitting more than 4-6 feet away, you wouldn't see 1080p anyway even if your TV was capable of displaying it.
That being said, it's honestly personal preference. I personally prefer 720p to 1080i. I have compared the two, and to me, a lower resolution progressive image looks slightly sharper than a higher resolution interlaced image. But if your TV is 40" or smaller, chances are you will not even see the difference unless you are sitting 3-4 feet from the screen.
On a larger TV (46" and up), I'd again take the 720 progressive image to the 1080 interlaced. Here's an analogy for you, RUBIC...you know when you take a small picture from the internet, and zoom in on it or blow it up bigger, it starts to look blurry? Well, if you are taking a standard def image (or in this case, a 576p, as an example) and blow it up to 1080, the quality starts to degrade, even though it's upscaled. I personally think that since the original game is less than 720p, the smaller the increase, the better the picture quality.
Again, though, I'm guessing your TV is fairly small, so in all reality, it's not gonna make a difference anyway. And sorry, RUBIC, but I'm not a fan of Vizio in the slightest bit. I think they make a really decent secondary TV, but I would not want to have one as the TV I use all the time. But if you're happy with it, that's all that matters.
I lol'ed when I clicked that link above and read the customer comments. In three of them, the person was upgrading from an RCA tube TV, and in one other, they were upgrading from a Magnavox. NO WONDER YOU LOVE THE VIZIO SO MUCH, PEOPLE!~
Also, we sell this TV at my work. I realistically do not remember selling a single one since we first got it in.
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