well i have been watching the netflix streaming on the xbox on our 52" tv and the normal resolution movies look like dvd quality. And the HD ones look like HD quality, so I'm not sure what your talking about.
If your doing it on your computer maybe that is different, I watched the same HD show I was watching on my computer as was on the 360 (on tv) a couple days ago and it was as you said a smaller screeen and you coudl tell it was being enlarged, but I did not really pay attention to see if I was watchign the HD version of the show or the standard version so that could be it.
Either way teh show was still very watchable on my computer and on the tv through the xbox it is flawless, maybe once every other episode did it have to rebuffer, so no problems there even. (which takes like 10 seconds at most)
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