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Sort of.

In his latest tech column for Develop, Black Rock Studio's David Jefferies says that Microsoft has dropped the requirement that Xbox 360 game developers display their games at 720p (1280x720). Apparently Microsoft has decided to drop the requirement due to issues with HDTV LCDs that often support native resolutions of 1366x768 instead of 1280x720.

In the article, he also discusses the tradeoff developers face between anti-aliasing and screen resolution; as you can imagine, the GPUs inside the PS3 and Xbox 360 aren't quite able to handle 4xAA with 720p resolution in some games:

"At this point most games, including our games here at Black Rock, drop down to 2xMSAA at 1280x720. We are making a trade-off and saying that the screen resolution is more important to us than the quality of the anti-aliasing. This isn’t necessarily an entirely voluntary move because, until recently, Microsoft had a TCR insisting that games run at 1280x720 – providing you weren’t one of the lucky ones like Halo, who got it waived and ran at 1152x640, that is.

"By asserting that screen resolution is more important than anti-aliasing we’re leaving ourselves vulnerable when the customer’s LCD decides it’s going to rescale the image to a new resolution anyway. If we instead assume that the LCD is going to rescale then, for some games, it might be more sensible to present it with a better anti-aliased but lower resolution image in the first place.

"As more and more LCDs ship with the full HD resolution of 1920x1080 then this will become less of an issue, but I’ve just had a look on Amazon and all the 26" and 32" Sony and Samsung TVs are still 1366x768.

"It’s is for this reason that Microsoft recently retired the TCR insisting on 1280x720. Now we are free to make the trade-off between resolution and image quality as we see fit."

(Spotted on Blues News)

I approve, at least in priniciple (quality of scaling to my 1680x1050 res means more to me personally). Final image quality is more important than rendering to an arbitrary res. My experience is that better FSAA, lower les beats the reverse (lesser/higher).