i have a philips 42pf7521/d..almost the same thing..
i have the 360 connected through vga cable, and vga-dvi adaptor, as my tv has only this connection. the audio is fed throught the dvi audio in.
i have great picture and sound..
did you know..
there is a magic button on that remote control of yours!! it took me almost a year to find it..my picutre was crap when i got the tv..didnt matter what i did or how i fiddled, i just couldn't imporove the crap pictre and grainy blacks..
second row of buttons from the bottom..third button from the left..it has SMART written above it and a empty box on the button..press it..it cycles between presets, choose SOFT, then go and turn up the brightness a couple of 68 is good. VOILA a NEW TV!!!!
hope this helps!!