Same problem after a fresh install of 4.0.003 on the LX3 here with the dodgy scaling on SD channels - Sky 1 showed it straight away with vertical lines visible.

SSH'd in and just did the following:

root@xpeedlx3:~# cat /proc/stb/vmpeg/0/pep_block_noise_reduction
0
root@xpeedlx3:~# echo 1 > /proc/stb/vmpeg/0/pep_block_noise_reduction
root@xpeedlx3:~# echo 0 > /proc/stb/vmpeg/0/pep_block_noise_reduction
root@xpeedlx3:~# cat /proc/stb/vmpeg/0/pep_block_noise_reduction
0

As soon as you do the first one it gets rid of it and then setting back to 0 it works fine with the weird scaling gone.

It's weird that the box is coming up with a fresh flash with the setting ok but then toggling the setting on and off fixes the problem?!