A cautionary tale:
A friend brought by an upgraded ATV2 yesterday so I could try it out to see if it fixed the wobbly picture problem without running to the Apple store (and back). It did not fix the original problem. It did not look the same, this time it showed up as a 4x3 image with static/multicolor striations running inconsistently horizontally and vertically. This was both through an inexpensive HDMI switch and directly connected, HDMI->DVI.
I took the ATV2 out of the mix and went about my day. The next time I brought up my Roku I had a nasty shock - the center 1/3 of the top 1/2 of the screen was duplicated and shifted over to the top left sixth. I powered everything up and down, performed factory resets where appropriate, took switches in and out, unplugged everything for 30 minutes - nothing helped. I tried my old ATV1 and it seemed to work OK - at 1080i. If I put it in 720p or 420p mode it displayed the same crazy behavior. Thinking it was an HDMI signaling issue - I plugged the Roku in via component cables and got the same behavior (Roku delivers a 720p signal). I plugged in my ATV1 with component cables and got the same behavior at 720p and 480p.
So, AFAICT, the brief chat with the ATV2 seems to have scrambled by TVs brains when it comes to progressive scan, or at least the 720p and 480p resolutions. 1080i still works fine. I'm not blaming Apple, I'm pretty sure something in my TV has malfunctioned due to age and stress. Probably some secret 1080i upconversion chip even though the manual says that it handles 720p "natively".
I've gone into the service menu on the Toshiba 42H83 - without a service manual there's really nothing to accomplish there.
I guess that's one way to solve the original problem - I'm in the market for a new TV now.