[quote name='neocisco']And I just finished redoing my entire A/V setup about 2 months ago. This sucks. I checked everything to make sure it was working right while I had it all pulled out but didn't think about this issue. Xbox is the only source I have right now that runs in 720p so I don't have anything else to use for comparison. Oh well, I'm sure I'll figure it out eventually.[/QUOTE]
Is your Xbox connected directly to the TV set via component, or connected through another source such as a switch box?
A few other items to test: Are you able to set your Xbox dashboard to ProScan? [hold L&R triggers, then click L&R sticks down] Some Xbox consoles are not able to display certain 480p games correctly; some of these problems 'can' be corrected by connecting to Xbox LIVE. The auto-LIVE-update sometimes help.
Typically, these problems are associated between 480i vs 480p, not necessarily 720p. But it's good to know your Xbox settings; updates.
There's really only three things to test.
1) Xbox settings.
2) Connections.
3) TV settings.
btw, can't see those pictures. When you say, 'severely distored picture,' do you mean completely stretched, just the sides stretched, horizontal lines over-lapping, lines in black & white, or bad reception type picture?
okay, couple more things to try:
1) try disabling 1080i on your Xbox, then play the 720p game.
2) try enabling 1080i on your Xbox, and try a game like Dragon's Lair 3D or Enter the Matrix.
Let us know how it works out.