I'm trying to record somewhat decent video on my G2 (not GH2) using SD aspect ratio, MPJEG, 14mm panasonic lens, no filter and the ini file below. Camera settings: manual, iso 400, shutter 1/30, aperture 2.5, AWB, 'VGA'. Sadly the video looks like it's taken in 640x480 despite using ptool to raise the resolution to 1280x960. Or rather it seems to have some trouble with the scene I'm shooting.
The problem doesn't appear when recording with AVCHD.. but I need to use a 4:3 aspect ratio so I'm forced to use MJPEG.
Here's the video, which despite being re-encoded on youtube accurately shows the problem.
It still has not been completely confirmed whether changing the resolution with the latest Ptools actually does increase the resolvable resolution of the MJPEG files. I was going to test it last night but I got side tracked with the moon video.
I have tested it with older versions of ptool and a resolution chart and it was just simple upscaling with all of the artifacts you describe. However, the video I shot the other day definitely looked better than what I was expecting.
The only true way to test it is with a resolution chart. You will see an obvious difference there if it is truly recording in a higher resolution.