Your settings look good to me from the picture you posted. Also, the picture made your footage look pretty sharp as well which seems to go along with my theory. As such, I'm still convinced that your problem is due to blowing up the footage during playback on a screen with a larger resolution. However, I'd love to be proved wrong about that!
As you said, it may just come down to using what you have until you get a big enough budget to purchase an HD camera with similar specifications (except for resolution size) as the GL2. It's a tough pill to swallow, but I think that the freshness of your content far outweighs any "blurry" or "grainy" footage in your episodes. Content is always first and you have that in spades!