I used to use the PlayTV on a regular basis until I upgraded to a Digital Stream Freeview HD box last year, but I remember the picture being pretty good and at least comparable to the internal tuner in my TV. I've just been doing some testing on it and, I have to say the Digital Stream seems to have the slight edge on most SD broadcasts, though some things do appear to look better on the PlayTV - it looks like it is sharpening the picture slightly which can make some things appear better. Having said that, it's certainly nowhere near being a night and day difference - I wouldn't say at all that the picture was bad on the PlayTV. From what I've seen, recordings also look slightly better on the PlayTV compared with live broadcasts, but I can't do a proper side by side comparison for this obviously so it's tricky to be 100% on that.
I'm not really too sure what to suggest other than:
1. Is the PlayTV running the most up to date software? Go to the main menu within PlayTV, then Settings and choose About. It should be on 2.03. If it's not, choose System Update from the top of that same menu (ensuing the PS3 has a valid internet connection first of course). (NB - if you're on an older version of the software, System Update won't be there - this will appear as Game Update Check under the About option).
2. If you're using a different TV input for the PS3, make sure it's been properly calibrated in the same manner as your internal tuner might have been. If you're using Game mode for the PS3, this may well cause normal TV broadcasts to look pretty bad, so you'd need to change the settings on the TV to the same ones you use on the internal TV tuner.
Let me know if this helps.
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