When I set the PC resolution to either 1920x1080 or 1280x720, the text becomes a garbled mess, and the colours saturate.
Does this happen for anyone else?
This occurs regardless of which "Aspect" mode you use. Reducing the sharpness to "1" helps with the text, but it's far from pixel perfect.
I'm on F/W GIG052, for future reference. This effect comes into play with all inputs, and makes 1080p games (via PS3/HDMI or 360/VGA) look blurrier than they should.
You're right, using 1920x1080 does make things blurry. It seems like it shouldn't with Fill to Aspect ratio or 1:1. Try changing the sharpness in the Image Control menu which becomes available with non-native resolutions. Strangely the softest setting of 1 looks best, still not as good as native resolution but better than the default of 4.