Yes, quite true, the SD outputs should, of course, be SD by default.
However, if you do have component video inputs on your TV, you'll get an even better picture. In this case you absolutely must set the video output to 480i.
Also, bear in mind that the recordings will be in 16:9 format (even if they are a 4:3 show, they will be 4:3 with sidebars so 16:9 net). This means you'll have black bars on the top and bottom of the screen so that it properly fits your screen. I didn't mind this, but on a very small SD television it might be somewhat annoying. I personally preferred getting the extra programming width rather than cropping it to fit the screen.