Is the picture 1080i or 1080p? I had my MacBook hooked up to my 40" LCD TV, and the picture was quite crappy. Couldn't even see the menu bar. Found out that was caused by the overscan 'feature' on the TV. But only through the menu icon for Displays, I could get the correct 1080p picture to my TV.
EDIT: Sorry, I misread your question. Well, then it's what the above posters all say. On a 13,3" screen a resolution of 1280x800 pixels looks beautiful. On a 42" screen, however, a resolution of 1280x720 pixels looks crappy. The pixels are huge, and it's a good possibility that the screen is actually 1366x768 pixels. That means, that the picture is always scaled if set to 720p. Screens with that resolution suck big time. Haven't got a single clue as to why TV manufacturers made TVs with them to begin with. Had they just gone with 1280x720 pixels screens, everything would have been fine.