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I have a 37 inch HD CRT in my room. I recently switched the Wii back to the (ok but admittedly not great) LCD in the living room, and it is an obvious step down, especially for SD sources. Not all HD sets are created equal.

Hopefully you get your setup sorted out though with some settings tweaking.

edit: @Zen: You should work for Samsung, you made me want to buy one of those TVs and i'm not even looking at the moment.