As it is the 360 will play HD games and play HD movies and TV programs that are downloaded to it. It will output all these in HD. Also if you get the HD DVD player addon, you can then buy HD DVD movies and play those too. So yes, yes and yes.
The HD-DVD drive apparently upconverts video better than the 360. I can't confirm this as I only watched one standard-def movie on the HD-DVD and it was projected to 90" diag. I could see the pixels. :wink: