It's about the cables, and what capabilities the game has to output. Even if your TV is 1080i it doesn't mean the game is showing at 1080i. It wasn't designed that way. 480p is the best resolution it's going to show at. Just because you can get it to fill your screen doesn't mean it's showing in 1080i. That's like saying you can take your 4:3 standard cable shows and stretch them to fill your screen, but that doesn't make it 1080 or even 720 (btw, MVP05 for XBox can go up to 720p..... which fills your screen, but doesn't translate to 1080i). The jaggies seem to become most noticeable on straight edges vs. helmets, shoulder pads, etc.
Finn posted a while back that 15:9 are the dimensions at which the game can operate, but 4:3 on standard TV's is what most people started with. My Sharp does a similar thing where it gives "layman" type labels like "stretch", "s. stretch", "zoom", but when a choice is made a temporary box appears indicating the resolution, 480i,p, 720, etc.