Also can I set seperate resolutions for the monitor and TV at the same time?
Well I selected the option to "Also show it full screen on my..." Panasonic TV and now it automatically plays the video fullscreen on the TV which is good. What are the technical specs to select to have the best possible picture display on my TV? Resolution, Hertz, Progressive etc? Thanks
I'm asuming you are just running it in clone mode - the results you're experiencing are normal. I would not recommend running a HTPC in this as you will encounter problems trying to have different resoltions on different displays.
As for the optimum resolution you really need to look at the TV manual, a 42" Plasma is typically only ever 1024x768 and VGA @ 60Hz is probably the optimum display settings. Using DVI you will probably need to experiment to firstly see if you can get 1:12 pixel mapping and secondly try and minimise overscan which may mean using something like PowerStrip.
42" Plasma's are actually a terrible TV for HTPC use. 1024x768 is a 4:3 aspect ratio not 16:9 so if you're using a HDMI input and feel it a standard 1280x720/25 or 1280x720/50 input it has to scale it to the panel resolution which means you typically can't get 1:1 pixel mapping.