I just bought a new Sharp Aquos 1080p 32" LCD for the bedroom and connected my extra NES system to it using RCA cables.  I have it setup at the original 4:3 aspect ratio with black bars on the side, but there is a lot of screen blurring and color changing whenever there is movement.  For example, on Final fantasy, whenever I move the streets darken significantly and when I stop they brighten back up again.  I can't seem to find any settings to improve this issue.  Does anyone know anything I can change in my TV settings?

Good question, i wouldn't know for sure but saeems like the NES needs some cleaning.

I'm pretty sure it's your TV... I've seen the motion stuff in movies on that type of TV.

If it is a new TV it will probably get better with time as well.  It takes about about 30-40 hours of viewing time to break in a new LCD TV so that  should account for part of it as well.
~~NGD

I should have mentioned that this same NES system looks great on my old CRT TV.  I'm surprised to have these problems since this particular LCD TV has very high response times and it supposed to be good for gaming, so I don't know what the issue is and it doesn't seem to be getting any better over time.  I have sent an email to Sharp and will see what they say.  Does anyone else have their NES connected to an LCD TV and, if so, how does it look?

I used to have my NES connected to my LCD widescreen TV.  Here were my observations

1)  You cant play any Zapper games.   This pretty well known but it bears mentioning again anyways.  I'd like to know if the same issue happens with Plasma (I assume yes).

2) You will usually see regions of the screen that the developers didnt think you would see around the outside edges.  These often appear as glitches, junk data, or empty data. For example, usually the 8 or so pixls all around the screen arent visible (I forget the actual amount)  so sometimes at the top of the screen you see junk sprites, or along the left and right of the screen a sprite will just disappear.

3) Newer model TVs like LCDs are more sensitive to the "bad palette" bug.  There is a color in the NES palette that developrs could use but apparently should not have used in their games.  It was used in the Game Genie, Sudoku and a couple of other games that slip my mind and can cause the TV to jitter around in an almost unplayable fashion.

Edit - Last comment.  I never really noticed anything else too weird.  Keep in mind however that the 2 different output types for the NES can have different looking outputs.  I never played any games where I noticed it though.    I also used to find that my reactions are slower on a LCD.  Maybe its the bigger screen that I'm not used to, maybe its because I'm further from the TV, maybe I'm getting old and slow, but I still prefer to blame the hardware.

Al

This kind of TV need to upscale videos from low-rez sources like your NES to fit the fixed resolution (unlike CRT TVs that can handle different resolutions). The longer reaction time and the blur are actually caused by this filter. For instance, your TV upscales the NES resolution (256x240px) to 1920x1080px. Quite a big difference, huh?
Does your TV have a 120Hz function? (It is 100Hz here in Europe, twice the frequency of regular TVs.) This stuff make things worse as it blurs what you see on your screen even more!
I think that we all need to keep a CRT TV in the attic to play our favourite NES games or choose a LCD/plasma TV with a really good scaler. (It seems that scalers from Faroudja are quite nice.)