I have been dealing with this issue since Monday. I swapped in the new AppleTV 4K on my LG OLED for the previous gen on Friday, but I didn't notice the issue right away because I only watched AppleTV+, iTunes purchased content and Disney+ until Monday. Monday evening I went to watch the last episode of "Jupiter's Legacy" on Netflix and one screen had some pretty obscure dialog. I went to turn on the subtitles via the pull down menu so that I could play with the new "circular scrubbing" by rewinding and I saw that there was just an HD badge in the info pane instead of the Dolby Vision badge I was expecting.
Since then I have played with all of the settings on the AppleTV to get this "fixed" but with no positive results. I finally started testing a theory that the AppleTV is actually playing the 4K stream, just the badge isn't right because the stream still looked good to me and because the TV flashes up either the Dolby Vision or HDR label when the stream starts from Netflix or Prime even though the info pulldown only shows HD and no mention of HDR or DV. Because the AppleTV upscales to 4K, my TV always reports 4K even if it is a title that is only available in 1080p. So I switched the max resolution on the AppleTV to 1080p and when I did that the TV of course only reports 1080p, but the Netfilx app shows only an HD badge on the title page of a 4K title. When I switch the max resolution back to 4K the 4K label (or the Dolby Vision label) returns on the title page. In both cases the info pull down in the player only displays the HD badge even though the played stream looks much better with the max resolution set to 4K. This of course could be because the AppleTV is no longer upscaling, so I tried to think of some other test.
Then I had the idea of playing "The Expanse" and checking the TV info, because it is oddly enough filmed with HDR not Dolby Vision. The TV will report the HDR profile for HDR, HDR10, and HDR10+ content. The TV reports that, even though the pull down info in the Prime app only displays HD, the stream is playing HDR with the bt.2020 profile. This HDR profile is only applied to 4K or 8K streams. This makes me think that the Prime stream is actually 4K. Additionally, YouTube reports over its completely different info function that it is playing a 4K stream.
I have a theory (a bit of a stretch perhaps) that this is just a labeling problem in the info pull down with apps that still use the "old" video API on the AppleTV. The video player or API set has been updated to work in the new "circular scrubbing" gesture with the new AppleTV. Netflix and Prime can use this new gesture, but they still use the old info pull down and so are somehow affected by this bug (partial use of the latest API set). The AppleTV player uses a new API set that has the info displayed at the bottom of the screen by pressing the back button. This player (AppleTV+ or purchased content) does not seem to be affected by the bug. YouTube and Disney+ appear unaffected by this bug, but both use a completely different proprietary player that does not behave at all like the AppleTV+ player and also does not yet support the circular scrubbing.
Hopefully this is indeed just a software issue. Whether it be with Apple or some of the various streamers that need to update their apps to correct this issue. Those affected will have to wait on more info from Apple (perhaps a software update) or an App update from affected streamers.
