So I may have found a work around for this but I really can't explain why this would fix the issue on my ipad air when every other apple device we have in the house streams netflix at full resolution (2 iphone 5's, 2011 macbook air and ipad mini).
By using any free vpn service, netflix steams at or near HD on the ipad air. Watching the example 23.976 video, the bitrate without vpn service connected is consistently at 235 kbps. I first tried using an app called hotspot shield and as soon as it was connected the same example 23.976 video bitrate was 3000 kbps! The only issue with all the vpn apps in the app store is they are only free for limited time and then you have to start paying.
I then found a free service called freehotspotvpn.com. This is free through the broswer, but must be data limited as netflix would only run at 1050 kbps. That being said, still much better than the 235 kbps.
Although this has helped my situation, it is still an annoyance and makes no sense that all my other devices which are not running through vpn services stream at 3000 kbps.