Which Project Preset did you choose, at New Project?
You may also get better results if you just burn a BluRay disc and play it on that xBox.
WMVs can be highly compressed files, designed to be viewed on computers, not TVs. It's quite possible that WMV format is what's causing the interlacing.
I chose NTSC - AVCHD Full HD 1080i 30
Have you tried outputting a BluRay disc or an MOV H.264 file rather than a WMV?