Check your HD TV specs -- I'd be surprised if you have true native 1920 x 1080 pixel resolution (HD 1080i spec). You will need a $5K + HD TV that does not interpolate the 720p image (1280 x 720) to 1080i. Most sub $5K HD TV run at native resolution of 1280 x 720.
Also 1080i is interlaced so a good HD TV will have a image frame buffer to prevent the flicker problems associated with interlaced image.
DVD movies are compressed to 480 per the DVD spec. HD-DVD will overcome this limitation, but current 4-8GB DVD capacity is not enough to support higher resolution beyond 480.
Do some research -- all this information is available on the web.
But I run at 1920 x 1200 on my 24" LCD on my PC so all XBOX 360 screenshots I've seen so far seem like crap to me even with AA at 1080i.
the xbox 360 supports 1080i and many HD tvs support true 1080i. you dont need 1080 lines to draw the interlace image. but you do need 1080 lines to draw a progressive 1080P image that xbox 360 does not support. and most current tvs today dont support it either the closest to it might be the high end SAMSUNGS that upgrade the 720P image to a close to 1080P
it does not translate into 9ghz, anyways ur tv is probably limited to that the max res for the 360 is 1080i as u know and for a comp moniter it is 1366 x768, im running 1280x1024 widescreen mode though
360 scales to 480i/p, 720p and 1080i/p. most games are made in 720p but a few are natively developed in 1080i, such as gears of war and rainbow 6 vegas. my tv does 1080i and 480i/p (no 720p) and all games look really good. all games also support in-game dolby digital 5.1 so they sound amazing.
as far as new video card or 360, well that all depends on your gaming preferences. i have both a decent pc and the 360 and love them both.