I recently modified my X360 component cable to work in conjunction with an hdmi cable ordered from monoprice.com and thought I'd post about it. There are pics as well as a brief method, basically I'm just confirming that it indeed DOES work.
I hope this topic doesn't come off as a troll, as I was legitimately unaware of this design issue when I bought my 360, and was disappointed to learn that the only way I could utilize 5.1 audio and HDMI video with my setup was to buy a MS HDMI cable with the optical audio dongle built into the cable. This cable is $50 as opposed to a regular HDMI cable (~$2.)
My setup is probably like a lot here, a high end TV with a medium end sound system. My receiver does not take hdmi, but that's fairly common for a 5.1 set. My tv does accept hdmi audio but it does not pass it through the digital optical out. And due to the design of the hdmi port, the component cable basically blocked the hdmi port on the 360.
I thought perhaps if I could cut through the casing of the cable, I could have enough room to squeeze an hdmi cable in there for video while using the component cable for 5.1 audio. I didn't know if it would work, but I took my dremel and hacked away at the casing. It's hard rubber, you could probably attack it with a sharp pocket knife. It took me about 5 minutes to slice through it with my high speel dremel. There appears to be a metal box in the cable, so you don't have to worry too much about cutting through the cable or anything. Just make sure you don't have it plugged in.
Always, do this stuff AT YOUR OWN RISK! I'm NOT RESPONSIBLE if you mess up your cable.
Here are the pics:

In this pic you can see the hacked cable, and the metal box at it's core.

And here you can see the hacked cable alongside an hdmi cable from monoprice. It's a tight fit but they do squeeze in there. If you decide to hack your cable, be sure to orient it correctly and cut off the CORRECT SIDE of the cable. I've tested it thoroughly and I get both 5.1 audio through my receiver and digital optical cable through the component cable, and hdmi video through the hdmi cable.