'Twas brillig, and the slithy toves did gyre and gimble in the wabe

The TV does actually use Linux, though I'd guess that it has a dedicated coprocessor for the MPEG video decoding.

The pixelation in VLC looks suspiciously like they've using nearest neighbour resizing, which implies the resizing is being done in software rather than using a hardware overlay (which generally gives at least bilinear resizing for free).

Speaking of giving up until the next I-frame (P- and B-frames are deltas, I-frames are the keyframes), I have found a couple of pieces of free software that claim to be able to tidy up raw recordings. Except rather than do the sensible thing and mark corrupt frames as drop frames, they just throw them away. If you're lucky they will also throw away the matching segment from the audio track, if not then your recording loses sync part-way through.