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If I download a HD episode of Lost from iTunes would I be able to watch the HD version on my TV via composite cable?

No. You can't sync the HD version to your iPod Touch, only the SD version. And besides, HD can't be transmitted over composite cables anyway. You would have to own the component cables.

"Component video output to television is supported by iPod nano (3rd and 4th generation), iPod touch (2nd generation), and iPod classic at 480p or 576p resolution; and by iPod touch (1st generation), iPhone, and iPhone 3G at 480i or 576i resolution."

http://store.apple.com/us/product/MB128LL/B
 
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