There's been a few articles about this recently; I'll link to the latest one I've seen that shows stills from the Vudu download service. Basically, if I may paraphrase Scotty, ya' canna' break the laws of bitrate. A 4- to 6-megabit per second 720p download to your Vudu or Apple TV or Xbox 360 just can't compete with a 30- to 40- megabit per second 1080p movie played from HD-DVD or Blu-Ray (ok, played from Blu-Ray since HD-DVD is all but dead). At least it can't compete as far as quality goes... it's trying to compete as far as convenience goes, but if these screenshots can be believed, there's not much advantage in quality over the standard definition download, and the SD downloads can start playing much more quickly than the HD ones.
I've bought some HD downloads from Xbox Live, and I've liked the quality, but I also haven't had my eyesight checked in a while. Maybe it's time.
Gizmodo: Vudu Test Confirms HD Download Worries
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