Hi Norm,
Don't rush to return your LG LCD. It's a nice set. In fact, I love my Sony LCD projection TV...but I too came to the harsh realization you did shortly after purchasing a large LCD set while being a DirecTV customer.
SD television is just unimpressive...to say the least. When I complained of this earlier I was told that SD broadcasts are meant for viewing on 32" screens (I could be overstating that), and that any screen over that size is artificially "blowing up" the image. This is what creates the 'nasty' image.
As a result, watching SD television (especially through Tivo) on digital projection sets is somewhat of a letdown...but a small tradeoff IMHO for the picture on HD, XBOX and DVD images.
Someone can correct me if I'm wrong (and I'm sure I've oversimplified this), but this is how it was explained to me...and I accepted it.
Zach