I have an ARCAM AVR 600 Picture degradation with cable tv--run through

I have spent considerable hours, trying to figure out if problem I have is simply a flaw in the Arcam avr 600
I only use it for switching between Comcast tv, DVD player, Turntable, CD/DAC unit, Hulu--
If I switch to regular TV---the picture degrades from 1080 P to 1280/720      ---TV is a Pioneer Elite 60"----I have checked against the Pioneer elite 60" tv upstairs (same unit)------when picture is simply running through the cable box, it is fine.  Perfect.  Same if I run downstairs tv directly into cable box---perfect picture.   
Of course, the point is I need a multi channel receiver for running all functions.   Amp, Pre amp, Phon Pre are all Conrad Johnson.  Vandersteen for fronts, center and rear speakers.

Ideas-suggestions????   I am about ready to simply chuck this unit and get something that works----again, as sound quality of unit is not an issue, as only using for switching amongst functions.   

If I need to replace to be done with this hassle----thoughts on replacement unit----that works!  Thanks for reading. 
So, wait, your definition of degrading is the resolution is not as high as it should be, right?

Check the AVR, per the specs, 1080 should be no problem:


Could be you have set the maximum on the AVR incorrectly. Try "auto" if available.