Games are at 720p so there will be some scaling somewhere. Either you scale the picture within the Xbox to send to the screen at 1024 x 768 using VGA, or you send 1024 x 720 (vga or component) to the screen and let the screen do any necessary scaling.
I imagine the biggest difference will be with the change in leads from component to VGA. Opinions on this seem divided, probably because every screen has slightly different ports, so on some VGA looks better others component.
If your screen is decent, and DVD and TV etc look good on it, it'll probably be doing a decent job of scaling, so leaving it at 720p will probably be fine. Getting a VGA cable just to try inputting a different resolution, with out any problems using component is probably a little excessive, but it's your choice.
Perhaps try to borrow a VGA lead and give it a whirl?