From What I know, Xbox 360 is capable of 1080p and the HD DVD add on should be able to playback 1080p. Component cables are capable of 1080p. Ask any Xbox 360 owner with a 1080p TV.
I have both PS3 and Xbox 360. Xbox 360 is a great gaming console. But when it comes to media playback, PS3 seems to to do better. Both are connected to my Onkyo receiver. Audio coming from PS3 when playing back audio/video media sounds richer than Xbox 360 to me.
When you watch HD DVD movie or Blu-Ray movie, you have the option of selecting Dolby TrueHD. PS3 can decode and send this through HDMI. Xbox 360 does not. All it does it decode it and convert it to Dolby Digital Ex or other lower formats.
PS3 definitely cannot beat the user interface of Xbox 360. It looks so good on displays of any size. PS3 dashboard is almost unreadable at display sizes lower than 50".
Xbox 360 supports WMV-HD and PS3 supports AVC-HD. If you consider buying an HD camcorder these days, many of them record in AVC-HD format. You can download it to a USB hard drive and connect it to PS3 and watch it without any conversion.