the video content is either 480p or 720p. most tv shows that you can download (networks like ABC CBS whatever) are 480p, with a few offering HD (like History Channel HD) in 720p. movies are usually delivered in both flavors, giving you the option of space over quality. the actual file is what it is: 720p or 480p. the only upscaling would be what your 360 does to get it to your monitor. since the 360 was updated over a year ago to support full 1080p, a 720p video would then be upscaled to fit the screen ONLY if you change the options for video playback. sort of like how you can zoom or lettrbox a source video to match/better suit your particular display. if you leave it at default, the video will be smaller since it is essentially fewer pixels than you're currently outputing.
by the way, dlc is almost ALWAYS in compressed form. trailers that you find on the net are for the most part usally either quicktime's .MOV or windows media's .WMV format, since that would draw an even distribution between the mac and pc worlds. both are MPEG4 video formats, offering h.264 codecs in their premium versions (WMV-HD, mp4). a wmv-hd formatted 100 minute movie is aprox 1.5GB in 480p, with its 720p variant weighing it 4.5GB, 3x the size.
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