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I am confidently guessing this could be taken even further and that a 1080i HD-DVD downscaled to 480i would still look better than the SD version for the same reasons.
I don't doubt this either, and it has in fact given me cause, as someone who has yet to find and be able to spend money on an HDTV that I like, to consider the XE1 player and view 480i for the time being.

Whether I do this or not would greatly depend on the XE1s ability to offer a region hack for DVD playback as Toshiba reps have hinted will eventually leak, and whether the price can come down just a little bit (though I am awaiting definitive confirmation on a price). Toshiba finally today confirmed the reports that the XE1 (the European name of the XA2 for those confused) uses Silicon Optix's Reon chip for scaling and deinterlacing duties which I think combined with it's 1080p support and HDMI 1.3 output makes it a very comprehensive player indeed, let down only by its lack of DVD-A support.

A good fellow from Value Electronics, Robert Zohn, who posts on AVS a lot and is a first class Toshiba dealer in the US is shipping his XA2 stock to customers next week and he has confirmed the XA2/XE1 will be offering 24p output via firmware update by the end of February stating that Toshiba will announce this update at CES next week.

Incidentally, Robert will be joining Amir from Microsoft in a panel debate entitled "HD DVD vs Bluray: And the Winner is…' at CES on Monday. Steve Nickerson from Warner and Andy Parsons from Pioneer will also be on the panel, as will Ben Keen from Screen Digest.