If you have the Component HD AV cable already, first make sure the switch on it is set to HD, and set your resolution to 1080p in the dashboard (assuming your TV will accept 1080p through component). Make any necessary adjustments on the TV. If you still want to improve quality, get the VGA HD AV cable, which always supports 1080p, and supports upconverting for DVDs (the Component HD cable only supports progressive scan for DVDs). Again, make sure to make the appropriate settings in the dashboard.
Also, sound quality is almost as important as picture quality to get the best experience out of your HD system. Hopefully you aren't just using your TV's built-in speakers and you have a surround sound system with optical input. You should be able to connect the Xbox 360's optical output to the TV and then the TV's optical output to the surround receiver (using inexpensive TOSLINK cables). Otherwise you may want to connect the 360 directly to the receiver, and either use the TV's speakers for normal TV or connect it to a different input on the receiver if available. Again, you may need to change some settings in the Xbox and/or TV to get the best results, such as disabling the TV's built-in speakers when using the optical output.
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