I understand the Xbox 360 can do this because of its onboard scaler chip. So it turns out that thing might be useful after all?
It might with HDMI, but not with the VGA cable - you only get 16:9, 4:3, and 5:4 resolutions to choose from with that (ranging from 640x480 to 1366x768 to 1920x1080), and if it's a component cable you only get "real" HD resolutions like 720p and 1080p.
My PS3 actually had the picture going off the sides of my monitor when it was attached to my 205BW via the same input method (so the picture was full-height, but you lose the edges, how very weird). There's no way to select 16:10 on it though.