Thanks Dr. Planarian. Your feedback especially considering that you have the XBR4 and Blue Ray/HD DVD is possibly the best prove that it is not the TV.
I also read a number of online posts that mentioned compression as one of the culprits and it makes perfect sense. I was really hoping for some feedback from someone who uses Blue Ray with HDTV LCD.
In addition, I never see any pixelation on my upconverting 1080p DVD player, but of course it is not the same as a true 1080i/p content.
I am going to get a Comcast digital box soon and see if experience any blocking on their HD On Demand content.