The reasoning is contained in the following FAQ on upconversion, which is usually better left to the TV than the STB. Also, if you convert to 480p in the STB (even though that's a pretty easy conversion), the TV will simply need to do an additional conversion to its native format, whatever that may be - see the second FAQ.
The FAQ referenced by 57 are correct. Historically, we've also had devices which can't handle a 480p signal generate more support calls. We try to recommend whatever will lead to the smoothest experience for the most people!
Ultimately, the recommended settings are simply that - recommendations. Feel free to experiment a little bit to find whatever looks and behaves best for you. If you end up in an unsupported mode with the 605/630 receivers, OPTIONS-4-5 and then 6 repeatedly will cycle through the Output Formats. On the 505/530, the red button on the front panel will do the same.
So do I understand the rather confusing name of 4x3 override to be best explained like this:
Regardless of what the resolution output your STB is set at, when SD signal is output it will be done so at what ever is chosen for the 4x3 override. For instance, the output is set for 1080i and the 4x3 override is at 480i then SD signals will be sent to the TV as 480i and the TV will deal with it accordingly. If nothing is selected for the override (neither 480i or 480p) then the STB tries to send it as the output setting (in this example 1080i)......correct?
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