Having trouble with pixelation on my new HDTV an PS3

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I'm driving myself crazy trying to figure out if this problem is due to my TV not being good enough or if I've not got something set properly.

I bought a brand new HDTV about a week ago, a Panasonic Viera 42" LCD 1080p 120hz (model number: TC-L42U25).

So, this is actually happening consistently with just simply watching TV as well as having watched a blu ray movie on my new PS3. I literally just got the PS3 also. To be specific the blu ray I watched was Advent Children Complete, in case you have it too if it's helpful to know. I have HDMI cables for the cable and for the PS3.

So here's what's going on:
On the blu ray movie, most times when the camera is moving around a character or the character is moving at different paces, (there's no certain pace, it seems to be sometimes it happens when it's fast, sometimes it happens when the object/character is gliding across the screen) I see around the moving character/object all this pixelation.
All these squares. Like there's this one part in this movie where a boy is standing still with rubble behind him, and the camera kind of pans around him with him in the middle and he is outlined in blocks of pixelation.

I called Sears which is where I bought the TV from and they immediately said "sharpness." So I adjusted the sharpness to both ends of the spectrum and saw no difference. Then I got curious and changed this MPEG NR setting from off to on and back again and saw no difference. I don't even know what the MPEG NR is but it was the only thing that I could find to change on the TV.
Then on the PS3 I changed some setting that has to do with video and game smoothness to the on position, but didn't notice a change.

What is the deal here? Is this my TV not being good enough for these graphics or what? I have about 20 days left to return this TV if it's that, but I need to know for sure. I don't want to return it and get a different one and have the same problems with it being a setting all along.
 
I'm driving myself crazy trying to figure out if this problem is due to my TV not being good enough or if I've not got something set properly.

So, this is actually happening consistently with just simply watching TV as well as having watched a blu ray movie on my new PS3.

Correct me if I am wrong, but didn't you just answer your own question?
 
I don't know if it's a setting or if it's just how the tv is! Now I'm even wondering if that's just how 120hz is? Maybe I'm noticing what the difference is between 120 and what I expect which could be 240? I called the store I bought it from and they said it was the sharpness setting but that didn't help when I changed it... Nothing really happened.
I have seen it on tv but not nearly as much as the blu ray/ps3. It's like with every smooth gliding movement there's pixelation.
I will be going back to the store in a few days, There's not many settings but I'm still hoping it is one as there are a few I don't understand. I got info elsewhere on ps3 settings but after checking it out I think it's not that.

And yea my guess is it's not good enough. But is it a problem I could have solved by changing brands and getting another with the same specs or by changing the type if that's the case?
 
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