It's because the SD TV has a lower resolution and the video was downconverted so to speak to be displayed on that TV. By doing that you get only a quarter of the original resolution which seems to be fine when viewed.
But the original resolution has to be pixelated as the CMOS sensor in that camera is not that big. Look at pictures taken wit a normal point and shot camera in their normal resolution and you will see grain (if low light) and pixels too.
The smaller the sensor the more pixelated and noisy/grainy (in low light) the footage. That's why Digital SLR cameras have bigger sensors to achieve better image quality and prosumer and professional camcorders have also bigger sensors.
Also CMOS chips are not the best with video footage, CCDs are better in that regard.
You also have to take into account that the camera uses the .h264 codec to compress its video footage. .h264 is a lossy and highly compressive codec made for distribution and not footage acquiring.
I've just looked at sample footage from
http://www.megaupload.com/?d=M080FXN4 via
http://forums.steves-digicams.com/forums/view_topic.php?id=599934&forum_id=92 and saw that the data rate of the video was 8.26 Mbit/s which is 1.0325 MByte/s for 29.97 frames which results in 35 KByte per picture with 1980x1080 resolution. My digital point and shoot camera with 4000x3000 sized images took 2-4 MByte per picture in JPEG compression, my DSLR takes 5-8 MByte per picture and more when shooting in RAW.
As the .h264 codec doesn't store every frame, only approximations and changes from one frame to another, you also have loss of quality.
I hope that much technical information helps.
PS: a little calculation example.
The P&S camera takes a picture with 4000*3000 pixels (12000000 pixels as a whole) and creates a 5 MByte picture.
You camera records a 1920*1080 frame (2073600 pixels as a whole) and takes 35 KByte to store it.
The 4000*3000 image is 5.78 times bigger than the 1920*1080 frame, but takes up 146.3 times more bytes per pixel than the video frame.
So the video frame quality is less than 1/25 of the quality of the still image shot with the P&S, and I can still see compression when viewed at 100% in my P&S image.
PPS: What program are using to edit them if you want to? Does this program read them without problem, or do you have to convert them to something else?