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The way I understand the problem is that the 540 S2 Tivos have one chip doing the same job that the older S2s had two chips doing.

My parents have a 540 on a 37" TV and the picture quality is obviously lower than I like, but my 540 on my 26" TV is fine unless I'm looking for picture quality issues, so I try not to do that. Nor do I worry about it because I see the picture and hear the audio, so I get just as much entertainment value out of it as the next guy.
 
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