It's because it's VERY highly compressed . If you watch it on a small screen it looks OK but if it is put on a large TV you'll see it. It's no replacement for a real camcorder but in a pinch it's better then "LD" (Low Def).
I know it is highly compressed but I have to think there must be a video out setting somewhere that they missed. I would think 720p would look pretty decent ported out to a HD set. I'd say that I'll know in 11 days but I'm holding off on getting the cable for the time being.
The quality of your video output is going to be largely affected by the quality of your video content. A compressed youtube video is going to look bad when you blow it up. The true test of the Evo will be to rip a DVD and play the file back. I don't expect it to blow expensive blue ray players out of the water, but then again, we're talking about a do-it-all device that only costs $500. Even if it just looks good, I'll be happy with that.