You'll get borders on 1280x1024 on some games because some run on 4:3, and others try to run on 16:9 I *think*, and as 1280x1024 isn't a standard aspect ratio (5:4), then you may get the optimium display, but I've not seen the VGA cable in action on 1280x1024, so I can't really say.
Other than that, you shouldn't be disapointed at all, as long as you buy games that are right for you, that you want to play, and fit the genres you like, and don't go buying a game just because it's pretty and shows of the potential of the 360. Well, that's my opinion anyway.