The new HD Netflix streaming service on the Xbox 360 (only available in the US at the moment) requires an HDCP compatible display device.

Today there's more news about the component connection.

If you try to play a movie while not connected to an HDCP compatible display, you will get the “Secure HDCP Link Not Found” error, according to Format War Central.

For all the people that have a non-HDCP TV/monitor hooked up via DVI to their Xbox 360, you are in trouble. What is not clear is whether your resolution be limited to 480p if you have an older Xbox 360 with only component outputs.

Update

Engadget posted an article today that states that 1080i over component is just working fine.