New TV - need help

[pgman]

Okay, I finally broke down and got a HD display. Samsung HL-S5686. I probably wouldn't have bought this TV, but it was a floor model and I got a pretty good deal. I still have my HTPC, P4 3.0HT with 1GB DDR2 RAM (dual-channel). This system has an older ATI Radeon X600 Pro adapter (PCI-E) with 256MB Video memory. I am trying to use the PC input on this television (as my only monitor).

The TV is 1080p, but the PC input won't accept anything more than 768 on the PC input (I have it set for 720 right now). I was thinking that I should just use DVI or a transcoder on the RGB out to do 1080, but then I realized I have a bigger problem.

The trouble I am having is that the color gradients aren't smooth. When I watch a DVD (SD) or SD television (I don't have an HD tuner card yet) the colors (particularly in dark scenes) are very "blocky". The gradient is not smooth. It really looks crappy - even for SD on an HD display. It looks almost like the bit depth is not high enough (imagine watching television in 256 colors - that's kinda what it looks like).

What do I need to do? Take this television back? Use a different connection? I would like to us DVI but I don't have the wire for that right now. My RGB cable run is around 24 feet from the RGB out (on the PC) to the PC input on the television. The TV looked perfect in the store - and the Windows desktop (and all windows - including the Sage menus) look fantastic. I bought the floor model (at a discount), so I don't think its a defective television.

Can anyone help? My wife isn't real happy about this rather expensive purchase that really looks worse than my 15 year-old CRT we were using until two days ago (at least when watching TV and DVDs)

EDIT

I downloaded powerstrip and I am going to try playing with that tomorrow. I re-read the manual for the TV and it recommends 1024x768 for the PC connection. It also says that you can not connect a PC to the HDMI input - I don't know why. Would I be better off buying a transcoder and using the component inputs?

I have tried everything I can think to do - default MPEG decoder, Cyberlink decoder, VMR9, Overlay, FSE - everything. Nothing seems to really make it better. I might need better cable as well, but I can't imagine the cable would cause such an awful color depth issue - espeically since anything on the Windows desktop looks perfect. I can surf the web from across the room and read every single word. The Windows colors are right, too - with none of the ugliness I see when watching DVDs or Television. I also tried watching a DVD with Cyberlink PowerDVD - it does the same thing, although the overall PQ is better than SDTV.