I sounds to me that your component connection is only delivering SD resolutions.
Is your cable/satellite box also connected to your TV via HDMI? If so do you get proper HD pictures? If so, what happens when you disconnect the HDMI cable? I believe there exists a form of copy protection that downgrades component to SD in some situations.
If it's not that, try connecting your TV to component - do you still get an SD picture on the TV?