Thanks for the fast response Gonk!
About your questions:
1) The fact that I attribute the error message to come form the 990 is just by the font, color and position of the message, but that might just be coincidental. Due to the advertised transcoding feature I expected the 480i sources to work properly with the described wireing. Do you think this is a hardware/software issue of the 990?
2) The TV I connected the 990 to by component video cable to is a 36'' widescreen CRT that supposedly can handle 480p and 1080i input but NOT 720p. As I mentioned earlier the XBox360 signal looks nicely detailed and crisp.
I hope this gives you further clues to determine what might be the problem. Thanks!