It probably your connection. My picture is incredible. Excerpt from press release:
Fans will now be able to watch the live action in a wide video window viewing experience. The video is delivered with an adaptive streaming technology, meaning the stream automatically adapts to the user's connection speed to deliver the best quality video the connection will allow (up to HD). Fans will also have the ability to select from a variety of widget options within the player, allowing them to choose to follow live stats and more.
Is your 3rd gen ipad getting hot like I have been reading? The ipad combined with apple tv is the way to go. I can still mess around on my computer and I don't have to run cords to my tv.