Apple TV (2nd generation) - video quality seems poor

I thought I'd switch from a Mac Mini to the new Apple TV (2nd generation) as my primary video device.

Unfortunately I find the video quality disappointing: Text (menus, etc.) is shimmery, and video seems coarse, like broadcast TV. I've tried it with an iTunes rental, with Netflix, and with a movie streamed from a computer. The results were poor each time. I switched back and forth between the Apple TV and the Mac Mini to confirm, and the image is indeed much sharper on the Mini.

The Apple TV is connected via HDMI to a Sony KLV-S32A10 32" LCD with 1366x768 native resolution.

Is this normal?

The problem was with the TV settings - it has three "Picture modes": vivid, standard, and pro. It was set to vivid, which adds artificial sharpening. With this set to "Pro", it looks terrific.