Split-Screen is fucking marvellous. Nothing beats sitting next to a mate as you brutally rape him on Soul Calibur, or as the two of you team up and play halo online.
Even with a small tv, I would still prefer split-screen to playing on my own. I would take the banter and company of a good friend over "better graphics" any day.
Borderlands and COD:MW2 (special ops) are the best games to play split-screen