Got the MHL cable today and did some testing. My results:
* Tried 720p MKV and 1080p MP4 and they played smoothly. Too smoothly actually as the frame rate was too high that they have the 'soap opera' effect. This was solved by adjusting the HDTV settings, I turned off high frame rate setting in advanced setting of our telly.
* Most games worked well except Need for Speed Most Wanted which had noticeable lag though it's still playable. I think this will run smoothly if I could change the telly setting to 720p rather than 1080p.
* There is no way you could adjust the output settings on the phone itself so you can only manipulate the output via your telly. Each TV brand will have different setting so results may vary.
I paid £4.75 for the cable from here
(choose the green one) and it has the USB power supply cable and HDMI out connected to the adapter directly so you don't have to look for some.
HDMI in and USB power supply both connected to the telly
It connects instantly with a message on the phone screen saying 'HDMI is connected'
Quality of output is superb
High graphic games may lag a bit but most will run smoothly
Just bring the cable anywhere to watch movies while traveling or at a friend's house