I use my XBox360 as a DVD player and have never experienced any issues with DVD playback, infact DVD playback is better than my old Philips DVD Player.
I have a Pal Xbox360 and play movies i've bought over seas, ripped, taken region coding off, burnt back to a DVD5 and watched.
I've never had "deinterlacing problems, noise, lip sync issues, vsync tears" issues.
Stop spreading bullshit around. As much as Microsoft sucks, the Xbox360 kicks ass. It gets far more use as a DVD player and Games machine than my PS3 which pretty much collects dust.