Now I'm going to jump into the controversy... think about it this way. Some device has to do a conversion, right? Your MEDIA is not in 1366x768, even though that is the most common HDTV set resolution being sold on the market right now.
....snip....
Now, since one device or another is doing a conversion, what's the advantage of making the

tv the one that converts? From what I've seen, most TVs do upconverting in analog. Have you dropped the resolution down on a computer with an integrated LCD and then gotten an incredibly jagged image? This doesn't happen on LCD TVs for the most part. Jagging is minimal.
So unless Apple put in some particular high-powered hardware to facilitate the conversion, I'm not sure why anyone would expect anything to be better as a result of the

tv outputting TV-native resolution with content at 640x480.