1080p and Sony Bravia (Full HD TV)

I'm not sure it actually outputs 1080p currently?

If that's the case then I would consider setting it to 720p instead which is what I currently run mine at.

Apple TV does not support 1080p.

Fortunately, most higher end TVs do support 1080i and 720P. They do this through upscaling circuitry. Think of it this way...your TV is 1080P, so everything it shows has to be upscaled to 1080P, unless it is native 1080P. Right now, the only sources of native 1080P that I know of are BluRay and HD DVD.
So everything else is upscaled.

Your Apple TV is natively in 720P. For best results, I would set the ATV to 720P, and let your Sony upscale it automatically to 1080P.

Alternatively, you could have the ATV upscale from 720P to 1080i, and then let your TV take it the rest of the way from 1080i to 1080P.

Which way is best is dependent on how good the upscaling algorithms are in your TV, how good they are in the ATV, and ultimately may rest on the eye of the beholder.

By the way, just about any 1080P TV looks great while playing 1080P source, or even 1080i source. But the higher end sets do a much better job of upscaling from lower resolutions to make it look good on the 1080p screen.

I have a similar rig (Sony kdl-46v2500, 1080p) and my experience was that, counter to expectations, my picture was noticeably improved when I set my Apple TV resolution to 720p.

You guys with your 46" V-series. I've only got 40" D, but like said, I find AppleTV at 720p just right.

Hey be greatful, I've got an early 32" Philips LCD with one DVI input (count them one!!). 🙂

Still love it though, component to DVI in and run at 720p, it's enough for me and my eyes.

1080p isn't really a true HD standard it's just used by the videogame industry mostly but it doesn't follow the original HD specs. There are tons of pages on the web about 720p, 1080i, and 1080p... not to mention all the FPS settings of various TV's. Over all it's pretty annoying stuff. I personally got burned with an older 720p TV because a lot of the BlueRay player require HDMI 1.3 and only have DVI. So I end up using Component, which still looks good, but it's annoying when you shell out some cash for something and then you have a industry that is changing specs left and right for what is supposed to be a somewhat standard interface.