Pal Progressive via HK 506 and Sanyo Z1...dodgy...?

I've just recently been running a Harmon Kardon 506 LE via component to a Sanyo Z1, beamed onto a 6 foot Owl Othello 16:9 screen. Now, the results at first glance are superb...not stunning...but very good for the price.

I set the player to output prog scan, which it does nicely...on NTSC material. Perfect geomotry, colours and good (for LCD) blacks...

However, leaving the player in PS mode and playing a Pal disc is a different matter. For starters, the picture becomes slightly squeezed. On 2.35.1 discs, the black bar at the bottom is a good 2 or 3 inches thicker than the top bar. The colours appear washed out and the picture becomes slightly "foggy". Switching the player into interlaced mode cures all the problems, and even makes pal discs look as good as NTSC in porogressive mode...

Now, the Harmon Kardon 506 proudly boasts in it's manual that it will output Pal Progressive...what it dosen't say is that it does it rather poorly.

Is this a common problem with Pal Progressive, or is it just my player? The Sanyo Z1 is more than capable of outputting a 576p picture, which is the reason why I posted this is the DVD section rather than the projector section...