I also have had little success with this feature. Everything comes out "chunky" (I have a big screen TV which makes the problem worse I think.)
Nikon's explanation is that the TV can only display 300+ pixels where the actual image is 3000 AND the camera doesn't handle image resampling.
This sorta makes sense as my husband's Sony first displays pics all fuzzy and blocky and then resolves the image so that it is clearer on the screen.
This is really the only feature that I am dissatisfied with....If Nikon's explanation is true, then why bother with this. Same lousy image would be displayed if you tried to run your shots out to video tape as well.