If you have a close look at the TV, the 720p image should look more detailed with very little, if any jaggedness. If both the 720p image and standard definition images appear the same, then it seems like something is downscaling the image to standard definition. It could also mean that your TV is doing a very good job at upscaling the standard definition picture to high definition, however no upscaler can put in missing information that was lost during the original downscaling process.
For a start, make sure your Xbox 360 is connected up using component video cables. Composite, S-Video (SVHS) and Scart cables are all incapable of carrying high definition. Finally, go into your Xbox 360's configuration and make sure the display output is set to 720p. By default, most HD upscaling DVD players and other HD equipment have component output set to 480p/576p for NTSC/PAL regions respectively for legacy standard definition TVs.