You're TV is only 1024 X 768? I could be wrong, but that might be part of the problem? Its not 480, its not 720, and its not 1080. I always heard for the best picture quality, running a display who's native rez is the same as the source, is teh best way to go. i.e, a blu-ray source at 1080, and a tv who's native rez is also 1080. Is that a computer monitor?
Others need to chime in...