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Definitely sounds like something is wrong. I've had Netflix for almost a year now and have watched countless HD movies on a 55" plasma (streaming with WD TV Live box) and also on my computer. Most newer releases are also 5.1 now too.
On the website settings, I believe you can enable or force HD last I checked. If not, then simply contact Netflix and they'll help you out. Amazon Prime is no comparison and definitely not a substitute if you're considering it. Their selection is severely lacking and is mostly stuff you can see on basic cable everyday.
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