Yeah, sorry to tell you this, but I play on an SDTV, and the graphics are definitely better than last gen (PS2, Xbox, Gamecube), but I wasn't as impressed as I thought I would be either. Some games have obnoxiously small text which is a by-product of the low resolution. I have the disc version of Warhawk ... I literally couldn't read half of the words on the menu, regardless of how close I got to the TV. When I took it over to my friend's house with an HDTV, I could read everything, no problem, even though we were sitting about 20ft away (it was a 60" TV, I think). In fact, I laughed at what the menu actually said compared to what I thought it said on my crappy SDTV; for example, what I though was "color" actually said "hue" ... it was that bad.
However, the text in all the other games I have is legible on my SDTV, and the actual in game graphics aren't much worse than HDTV graphics. I've never had problems differentiating between objects, but things like blurriness depend on the game and your specific TV. HDTVs definitely make the graphics look better, but they also show smaller imperfections. One of the only major problems I have with my TV compared to a good HDTV (other than the occasional game w/ small unreadable text) is that darker games are nearly unplayable because of the low contrast ratio on my TV ... but I usually just turn up the brightness all the way to make the game playable - I don't mind the fact that the colors don't look as good.
Anyway, try component cables or HDMI cables, (HDMI is better than component), if your TV has the inputs for them. In order to change the resolution, you have to keep both sets of cables plugged in to your PS3 and TV at the same time, then go to the settings and change the resolution, then take out the composite (red/yellow/white cables that came with the PS3), and you should be good to go. I'm not sure why you have to do it that way... in fact, I haven't done this myself, but I have read in another thread that you have to do it this way for some strange reason.
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