Update:
I finally got hold of a Blu-Ray player (Sony) to check and compare; the picture quality is simply awesome in almost every mode which I tried on the TV. No tearing, judder even in the PC mode...lol.
So to my relief the problem is NOT the TV and could be anywhere on the HTPC or it could even be the HDMI handshake between my TV and H55/I3-530 Combo.
Now to the next step of debugging...I'm thinking of adding a graphics card to see if the H55/I3-530 graphics is the culprit here.
Do you have any suggestions to choose between Nvidia and ATI with the criteria that DTS-MA & TrueHD Bit-streaming should be supported.
I've read that ATI rules the roost (as far as HTPC's goes) with the 5xxx cards but the low end 5450 cards exhibits edge distortion problems and the next higher card 5670 costs more than my motherboard..lol.
All suggestions are welcome but please keep in mind that flawless 1080P playback along with DTS-MA & TrueHD Bit-streaming and of course the best bang for the buck is the goal. Or in other words, I'm noatt a gamer to necessitate a high end video card for my HTPC.