I completely agree. Just enable it please. I know the quality will not look so great on a 60" screen but can we leave that up to the users to decide?
For example, I may be parked in my car waiting for somebody, or in the parking lot at a sporting event, etc., and I want to watch my slingbox on my car's display rather than my small phone. I can do this in HQ mode, even if it may stutter a bit. Enabling SQ mode to do TV out would be perfect in my case. And with a 7" screen (in my car) SQ might look just fine.
Just throwing my hat into the ring.
I, too, have discovered the lack of video play out in SQ mode, and our home broadband's bandwidth is inadequate to stream HQ. I'm absolutely willing to deal with the compromise in quality (I've been streaming to Slingboxes for 5 years on this same connection), and it's been part of an elaborate multi-part plan to be able to stream through our iPhones to a television while traveling.
Slingbox Support: Can we hope for a change in this behavior of the iOS iPhone app? I'd take a user option with a (momentary) "low quality" warning, if that's your concern.
5+ year Slingbox user
(AV, Solo, Pro HD)