Found my biggest problem. It was the cable box. It allows me to pick 480p, 480i, 720p, 1080i.
I set it up for all of them. If I have 1080i as an accepted format then it maks all channels 1080? I f I get rid of 1080 then it adjust itself for each channel. Sometimes 720p, sometime 480i, sometimes 480p. Now the regular(non hd) channels look much better and the hd channels look great at 720p. No blockyness at all. Of course the xbox 360 rocks on this tv as well at 1080i.