I can't solve your problem, but I do want to assure you that it is not some problem specific to the TiVo. I used Netflix for close to a year with both my THD and S3 TiVo boxes, with no problems at all for HD programs. I finally got tired of the terrible Netflix service (really crappy streaming during all prime time), so I canceled the service.
There are lots of things that can affect Netflix performance, including server load, Internet traffic, your local ISP, your router, and your LAN. But I do not know of anything that would give you the gray screen you describe. I suppose it could be related to extremely low bandwidth or network speed, but since you did not provide any information in those areas, I cannot speculate. I hope you get it sorted out.
TiVo Bolt 849 - 1TB - 156 HD/1065 SD, OTA
TiVo HD 652 - 2TB internal - 318 HD/2777 SD
Series 3 648 - 1TB+1TB Apricorn DVR Xpander - 265 HD/2512 SD
Series 2 - threw it away 'cause PQ sucks after HD!