Oh dear:
Rule #1 in TV land: never ever apply the same upscaling filter over UI stuff as your video. UI stuff has sharp edges, so any sharpening makes it look worse (high freqs appear even more -> halos etc).
As far as I can remember, XB1 has this video compositioning block with up to 3 layers. Guess they were targeting OS, HDMI in and game. They should have allowed for static video menus, huds etc. as a seperate video layer, rendered at 1080p, then compose it with your upscaled in-game video. However, can imagine that was not a good idea, because you keep your game at a lower resolution than 1080p due bandwidth issues at the first place, so a seperate stream/buffer for menus/hud etc. doesn't fit the budget.
Now, why would you add sharpening on graphics / video in the first place ... about the blacklevels could it be to save BW and resources the scaling is done on subsampled YUV ?
I don't really see the problem, I'd say most Xbox fans love halo
Ontopic: maybe the UI-layer could be in a lower color format, to save bandwidth and framebuffer space. That way you can still have enough budget.