spider-man_man: I had almost the exact same experience, at least to start with, tonight.
I went to the CC in Gaithersburg, MD, and they had the 32D40U on display next to the 32" Bravia XBR. The difference was night and day as you described, HOWEVER, I did find both a Sony remote and a Sharp remote with a little detective work (hehe).
After fiddling with the settings it was clear that the XBR offered a "Vivid" mode that equated to ~80% of the difference in PQ between the two, imho. That said, the XBR did look MUCH more impressive and it had a much more robust configuration menu. Shame it doesn't have a DVI-I input (unless I am mistaken?) or two HDMI inputs, because then it'd be perfect imho.
One item of note: The remote for the Sharp I found at the 45" D40U display. I checked the 45D40U menus and it has a MUCH more elaborate and in-depth configuration menu system than the 32D40U. Much more professional in that regard. Also, the 45" was pretty impressive. Just have to get that out. Have to say it. The 45" impressed me. It was way more TV than I need though, hahah.
Let me describe what I consider important areas for the 32D40U and 32" XBR to give a more complete review of each, since I fiddled with each for a good 10-15 mins:
The XBR was the superior display of the two. No question about that. Without the Vivid mode engaged though, and with a few other settings changed (Brightness jacked up, Color reduced, 'special option I forget the name of that helps remove crappy pixelation' turned Off), it was possible to match the Sharp's best possible picture. The Sharp at its best settings (best I could do anyway) could not come close to the XBR at its best settings.
The Sony is much more my style, being silver and sleek. The Samsungs are the ugliest of the three major "S"-named LCD brands, and the Sharps fall somewhere in between - not ugly but not quite my style either. I did not even look at the Samsungs due to their unappealing design.
Without mentioning actual prices since I don't want the forum police editing my post (hehe), I will say this: The 800-1000 difference in price between the two is gigantic, considering their going prices and their equal size. My conclusion after playing with both is simple:
The Sharp's price is great... for the XBR. Heck, the XBR would be a steal at the Sharp's price. (But the 32" XBR needs to be at about half the markup it currently has over the Sharp, for it to be worth buying imho.) The XBR offers the PQ I would expect from a 32" LCD HDTV in the year 2006, but I would expect that PQ at or about the Sharp's price. I would not spend the -(fill in your local price)- dollars the 32D40U costs for the 32D40U, but I would spend that much or a little bit more for the XBR. I would not spend the XBR's price for a 32" LCD HDTV, period.
I would buy the Sharp 32D40U if it offered the more robust menu options of the 45D40U, a DVI-I input, and a 4-5 color backlight. I'd even pay slightly more than the current 32D40U's price, assuming the picture quality ended up even better than the XBR's, which a 4-5 color backlight and robust configuration options should allow.
What this leads me to conclude is that I either need to hit a big bonus at work this quarter so I can be less prudent with my spending and get an XBR, or prices need to become more reasonable on Sony's LCDs and/or Sharp needs to do even a bit better before I would consider buying either of those TVs at their going prices.
So to answer your post, spidey, I would say that the Sharp 32D40U CANNOT be tuned to match the XBR's PQ, but the XBR is indeed overpriced. That said, I believe Sony offers the S200 series Bravias at a PQ and price more competitive with the D40U. I am planning to go back to BB tomorrow where I saw the 32" S200 Bravia and find the remote and see if it offers most of the same menu config options as the XBR, and good PQ, in which event that might be my choice. I still lament the lack of DVI-I and 2xHDMI on the Bravias though...