A few things you all need to consider.
If you want to use the monitor/TV as your main computer screen rather than your notebook screen - cannot recommend it strongly enough - get a monitor - or at least one of the smaller 19" TV's that have 1440 x 900 resolution instead of the standard 720p at 1280 x 720 for almost all LCD TV's.
Personally, I find the way OS X displays text to be totally unacceptable on a 720p display of any size. (XP and no Linux distro I have tried has this problem - am hoping Leopard will fix this.) I have tested and played with connecting my MBP to 26", 32", 37", 42" and 55" 720p displays.
If you are only wanting to use your Mac's DVD player and display this on the TV - the picture will be just fine as your DVD's are only 640 x 480 to begin with.
Watching TV - you will need 1) a tuner and 2) an antenna or cable / satellite feed.
You really only have a couple of options here. Get a TV with a built in tuner, or get an Elgato EyeTV to connect to your Mac (edit: skye's idea of an old direcTV or Dish receiver for using the built in OTA, over-the-air, tuner - should work, I'll give it a try this weekend.)
With a TV, once you have it set up, you turn it on and just watch it.
With the EyeTV, whenever you want to watch TV, you'll have to reconnect your Mac to the TV and re-connect the EyeTV to your Mac and start the software up. The big advantage here is the ability to record your TV for watching later, and pausing or rewinding live TV. It gives you all the functions of a built in DVR.
Price wise between the two options are about even. The EyeTV Hybrid which will give you your local digital stations (including any that are in Hi-Def) lists at $150 which is about what you will pay extra for an HDTV vs a monitor of the same size. (NOTE: There are other elgato devices which will give you analog TV - but why?)
Connecting your Xbox 360 or other gaming device.
With a monitor - you'll need to get the VGA adapter.
With a TV - you'll have the option of connecting most likely with composite, s-video, component, VGA or HDMI.
Sound - this really depends on what you expect (or want).
For those of you living in dorms, am thinking you will probably not want to take up any more space than necessary. Would probably just stick to either the speakers on the TV or if get a Dell monitor, most of them have speakers built in and for those that don't they sell a sound bar (about $30) that attaches to the monitor.
My own recommendation would be a setup similar to one I use in my toy room. For your own ease of use - that would be an LCD HDTV, get an antenna for your local over the air TV stations, hook up your XBOX (or other) and these stay connected at all times, no muss no fuss. Get a cable for attaching your Mac to the TV and leave it plugged in all the time. The only thing you would ever have to do is connect your Mac to this cable. Use your Macbook screen when you want to work, and your TV screen when you want to play. You can use the speakers on your Mac for sound if need be. Here's some pics, maybe give you some ideas. (I know spudd has already seen them.)