"Very common problem"

The PS3 can't display a BluRay movie in any HD resolution other than 1080p. Everything else is downscaled to 480p. The HDTV will receive a 1080i signal, but the picture is grainy and has been down-sampled. Sony says it's a very "common problem" and there will be a firmware update "in a couple days"

Link

Expect many updates to fix the many bugs!