help with my tv

Ok guys im new to this. I have recentlly upgraded to a new 26in RCA lcd hd tv. I have a couple of questions. Ive been switching beetwen reosulotions 720p and 1080i and on both pictures on games look really crappy. Like you know the loading screen on cod4 online when your waiting for the map. It looks very bad worse then my 480 sd. Is this normmal because the displays larger and the image is getting stretched. Also my tv channals are bad except for the hd ones. Blu-ray playback looks awsome though. Its just certain stuff that looks like crap.

im using hdmi cables from sony

http://www.walmart.com/catalog/product.do?product_id=4698018

thats the tv

the res is listed on there

I think the image getting stretched is the problem. I looked around at some user reviews of the television and they also commented on a stretched screen.