The Xbox 360 should upscale 480p DVD...
I can't really find a straight answer on this. A lot of places says the 360 does upscale to 720p, but xbox.com says "Watch your DVD movies in glorious 480p from the get go." It seems some of the other sites base their answer on this statement alone.
If the 360 doesn't upscale, it easily could with a patch from Microsoft.
I will have to test this out, but if the 360 does upscale SD DVDs, then I give an even bigger middle finger to Bluray and HD-DVD. This means unless you have a fancy Plasma or LCD DLP HD television, then the noticeable difference between an upscaled DVD isn't worth the price.
[04/04/06 Edit: The 360 DOES NOT upscale movies. That's too bad; Microsoft should have done this.]