The quality of the TV does make a difference, especially on the 360/PS3.
The main issue on the now old console tech is you get plenty of aliasing, and low rent textures at times, a PC monitor/cheap LCD TV won't flatter them at all, most I see tend to be harsh and have excessive edge enhancement (sharpening) going on, sitting close to them just amplifies it beyond what most people would find reasonable.
I think you want to move your 32" TV further away, and see if you can remove any harsh processing it may be applying (if it has 'sharpness', actually deliberately slightly softening the image may help).
I use a 28" viewsonic PC monitor for gaming, and the PS3/360 look pretty ropey at times, but you get used to it, if I take either console to the front room on a mid range Toshiba 46" LCD, they immediately look much better, mainly viewing distance adds some smoothing, but the TV's processing is of a higher standard, and that also helps..
I hear what the OP is saying, and agree with some of the comments, end of the day, it's not a major issue, Halo Reach is a great game, the graphics aren't half bad in a lot of places, with good texture detail and reasonable lighting effects, but the aliasing and slightly low res do mean pixel peeping will end in disappointment.