What make/model is the TV?
What's the native resolution?
Personally, I'd go for 720p.
The native resolution of most HDTVs is 720p (well, actually normally 1366x768, but 720p is the closest you can get via component)... you generally need to have a pretty big one for it to be native 1080i or 1080p.
Xbox360 games are all 720p AFAIK.
http://en.wikipedia.org/wiki/720p#720p_versus_1080i