Hi harisled, I haven't tried it on my HT setup yet but I think I know why it is not working (at least for me) on my computer monitors. I had forgotten that the MHL 1.0 spec only allows 1080p @ 30Hz until mr.joshuanice had mentioned it. The two monitors I tried it on initially are computer monitors so they probably don't support 1080p @ 30Hz. I'm guessing the HDCP handshake (or whatever it is called) reduced the resolution to 720p @ 60Hz which is supported by my monitor. However, this causes the monitor to upscale causing the image to be blurry (like you have experienced).
I will test it on my HT this weekend which should work (I remembered testing this out a while ago). The only thing that sucks is playing games @ 1080p. As some have experienced, playing PS Mobile games at 1080p resolution makes the game really sluggish (@ 720p is great). I remembered someone had show a screenshot of a menu which allowed you to change the resolution but it may have been a different Sony phone or a different ROM.