I don't believe that it has to do with the setup.
I also have experienced the grainy issue. I think the problem is that the set it VERY unforgiving and gives a very good representation of what the source really looks like. Also, you are dealing with pixels, not lines. This takes away any chance of it having a soft picture like other displays.
I thought that a DVD on a good progressive player would be a good test for this tv. There are some DVD movies that look like total crapolla on my 507 (Backdraft is the worse so far, and Ballistic: X vs. Sever is the best)However, if you really look at it, it is a problem with either a really bad source, the encoding of the DVD, or both. MPEG1 and 2 in general have a very tough time with skin tones, and you get that globby, pixelly thing alot. DVD technology was not designed to look good on a set with this kind of resolution.
Sat TV, of course, is still just MPEG2. However, it is even worse since they choke it to cram more stuff on the satellite.
The best picture I have seen by far is our local PBS in high def. I mean WOW. It to me is what HD is supposed to be all about. Like looking out a window. However, again, there are some times that even HD can have a little pixel issue especially if it is an upconvert.
Look at it like this. Owning this TV is like having a really fast car and living in a suburban area. You never can really get on it. But, sometime, you hit an open stretch and WOW, it is awesome!!