It's not matter if it's going to do much good, but rather it
has to happen in some scenarios.
All fixed pixel displays must display their picture at their native resolution. So if you have a 1080p display, and give it a 720p signal it must be scaled to the 1080p before it can be displayed.
So if you have a 1080p display, and you are playing a game which has native resolution of 720p on the 360 you have two options to scale the signal to 1080p.
1.) You set your 360 to output 1080p, which means that it is now doing the scaling before the signal leaves the console, and your TV does no processing.
2.) You set your 360 to output 720p, which now outputs the signal (game) at its native resolution, and then your TV takes the signal and scales it to 1080p.
Again, scaling of any sort is never better, but it has to happen either up or down if the signal/material being feed to the display does not match the resolution of the display.
We are probably just trying to think form different angles