I have a basic understanding of XNA 4.0 and i want to create an xbox game. What size window should i use? should i use the 16:9 aspect ratio then put it in full screen?
Best practice is to use the default setting, 1280x720. This allows the console to upconvert to 1080i at no cost to you (dedicated hardware for it), or letterbox down to SD resolutions, again at not cost to you. Doing anything else requires a lot of code. It is feasible to accomplish, but normally has little benefit and is not easy.
Also, for publishing on XboxLive, if you try to implement a custom resolution detector/selector, and it doesn't work, that is cause for rejection during peer review.
Edit: unfortunately, the official best practices article seems to be a broken link over at xbox.create.msdn.com, but the evil checklist for peer-review also recommends 1280x720.