The Elite and Premium versions of the console come with a HD, (I would go for the Elite as it has 120GB). Most of the films are 720P, there are a few in 1080i but mostly it's 720P. The 360 itself support resolutions up to 1080P and most games support (and perform well) at this resolution. The only noteable exception seems to be GTA IV but I'm not sure what is up with that game, the PS3 seems to suffer even worse on the GFX front with GTA IV, maybe the much delayed DLC will solve the problem.
Personally I much prefer my DVD/Game Rental deal to direct downloads from Microsoft.
Dakheart
Personally I much prefer my DVD/Game Rental deal to direct downloads from Microsoft.
Dakheart