I am having the exact same issue. It works perfectly if I connect iPad2 to hdmi using apple cable, but if I switch it to SD, only sound. This is most definately a bug as you are correct, SD should not require anywhere near as much bandwidth, but I am not even sure its a bandwith issue. I have bought both the iphone and the ipad version of the player...plus all the equipment required. I have a 50Mbs down and 5Mbs up connection, so it won't be my home that causes issues, it will be software. I hope they can fix this problem soon as I would prefer to do tv out in SD for bandwidth usage reasons. Our plan is to use this as the source of entertainment at night at our cottage where we have a 2-3Mbs 3G speed.
Please, Sling... respond and at least tell us you are listening to this forum.
Hi OnePh8 and titanflyer, the information below can help you get the answer for this issue, basicaly the Slingbox can only send the video out if you use HQ mode, all the details are below.