I'm trying to spread this around and also get more feedback on it, but after recently acquiring a PSTV and PSVita, I've noticed the former does a seemingly poor job of displaying
PS1 and possibly PSP games as well.
My suspicion is that bilinear filtering is enabled by default, and that's what's causing the issue - significant blurring compared to the output of PS1 via PS3 and PSP video out.
This would be supported by the fact that my PSVita has filtering enabled by default when I tested out some PS1 titles last night - and it made them look blurry.
I have to do more PSP testing to confirm if the same issue persists there, but on first glance, the games looked worse on the PSTV than other platforms. Vita games looked good, for the record.
If this is all for the reasons I suspect, then I think we need to raise our voices and get Sony to restore the relevant missing PS1/PSP game setting functionality back into the PSTV firmware that was removed as compared to the PSVita.
Filtering should be an *option* or just disabled. Scaling mode choices would be nice. Etc.
As it stands, these games look bad and they needn't be.
FYI what bilinear filtering does and why you shouldn't be using it if you want the correct look and appreciate the original art:
http://blog.kertgartner.com/wp-content/uploads/2012/02/Filtering.png
lastly another link of a PSTV compat list that is pretty up to date:
http://vitareviews.net/playstation-tv-compatible-games-north-america/#more-1885