This is an issue I've tried to solve for months now, and have yet to receive a solid answer from anyone. Apparently, only a handful of people are experiencing this problem, including both you and myself. It also doesn't matter which TV you have, since I've come across those with Samsung's and Vizio's (among a few others) having identical problems.
My tv is the Vizio 32" VX32L (@ 720p via component), and has this issue. A quick Google search shows that others are having trouble as well, such as here. Apparently, there's nothing you can do. I've tried different cabling (VGA), but have yet to try a different console with the TV or a different TV with the console. However, there's an interesting story here, which describes a user only having issues after he got his broken Xbox 360 replaced, indicating a console problem. If my console is replaced, I'm curious to see if anything changes. If you're able to try any tests with the console or TV, let me know the results, because I'm in the same situation.
In my findings so far, it doesn't seem to be the TV, or cable. The Vizio is perfectly capable of displaying crisp, smooth lines, but it gets these "jaggies" in certain games (in excess), like Halo 3 or PGR 3. Gears of War still looks quite good, although it's still apparent. I've gone to friends homes, and can assure you this isn't how the games are supposed to look. Halo 3 on a monitor or Sony Bravia (forget which model) is incredibly crisp, something my TV fails to show.
Good luck in finding answers.
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