I've got the same DVD player hooked up to my display and I've just got an HD-DVD drive for my 360 from eBay. Once it arrives I'll give you some impressions if you like.
I've basically bought it as a stop over until a dual format region free (for Blu-Ray) player turns up, hoping Samsung helps me out there, it'll let me watch HD-DVD films (okay not optimum performance, but for £120 it doesn't matter).
I have the HD-DVD addon and am watching on 37inch LG LCD. Haven`t seen the standalone players but am very happy with the 360 addon. Picture quality is very noticeably better than standard DVD, I`m not much of an audio connosieur (?sp) but don`t have any problem with the sound from the add-on, although many do, so if you`re an audiophile maybe that would sway your decision towards a standalone player.
I recently sold my HD add-on and with some ebay magic raised enough for a PS3 so am lucky enough to own a 360 and PS3 (my wife is thrilled) The reasons?
- The 360 is just too noisy imo to be a credible movie playing device. Add the HD drive too and you have something akin to a hairdryer buzzing away. I just got fed up with it.
- Whilst I don't care my gut tells me that BR will win out in the format war.
- I got fed up waiting for the sound fix on DTS/lip synch.
PQ was good, though mind you after watching MI3 on bluray my (uneducated) opinion is that the PS3 is a better BR player than the 360 add on is a HD DVD player but then that could be the HDMI difference on my TV?
For games though if you forced me to choose I'd keep the 360.
One thing to bear in mind if you are going to replace your main player with the HD-E1 is that although HD-DVDs are region free, stadard DVD playback is locked to Region 2, with no way to multi-region it (at the moment). Of course if all your DVDs are R2, then its no problem.
Got the add-on last night and watch a bit of King Kong, Goodfellas and about 45mins of Serenity.
* I wasn't blown away by the picture quality. Expected the difference to more similar to football on Sky Sports 1 vs Sky Sports HD 1 - not that much of a difference to my eyes. I am yet to compare my DVD copy of Serenity upscaled to 1080i via the DVD player against the HD-DVD copy.
* No problem with sound or lip-syncing at this time.
* The noise of the 360 and HD-DVD drive can be intrusive whilst watching a film.
Sony Bravia KDL40W2000
Xbox 360 + HD-DVD add on
Videologic Digitheatre DTS
We've gone for the add on as it's a cheap way to be able to play HD-DVDs, it's not going to be as good as a standalone player, but I'm waiting to see if the Samsung dual format machine is any good. It's out around the end of the year, and I'm way too impatient.