The SA8300HD does not do a good job of deinterlacing 480i signals to 480p.
Turn the SA8300HD off, then press and hold down the info and guide buttons until the setup screen appears; choose Advanced Setup and enable 4:3 480i, 720p, and 1080i; save that change, turn the box back on, and choose AutoDVI/AutoHDMI in Settings -> Settings menu.
Why aren't you using HDMI output from the SA8300HD to your Denon receiver? That should be the first thing you do. You can order a quality HDMI cable from Monoprice.com for $5.
I would avoid component -> HDMI transcoding and upconversion in receivers whenever possible. Aside from the AVR-5805CI, most Denon products will degrade the quality of your picture when you use their transcoding + upconversion feature. For now, use HDMI output from the SA8300HD and disable any transcoding / upconversion in the Denon receiver.
Without a picture, it's hard to know exactly where your problem lies. It almost sounds like a grounding issue, but you only see the problem with digital SD channels, and not HD? If it was a banding issue inherent to the LCD, it should be noticeable on all sources. Regardless, I would try the above steps first to isolate the problem.