I have a 32" Sony HDTV hooked up to my work computer for my CCTV system. The TV has a VGA port in the back so that's what I used first to hook it up. The clarity was not the best so I tried a VGA-HDMI converter. Honestly I don't think this helped much at all.
I have a 32" Toshiba and have dealt with text issues a lot. (I assume you are talking about fuzzy text, yes? If not disregard my help. I have always had a near perfect picture over VGA as far as video goes.) First, are you using a discreet video card? You will need one to do any tweaking of the resolution settings to get decent text reading. My on-board Windows Display settings just aren't up to snuff. The only thing you can do is lower your resolution and up your text dpi size in Windows display settings. (And turn on Clear Type tuning if you haven't.)
Second, you really do need the options that get enabled with an HDMI connection. When I connect via VGA a lot of options for resolutions and such are not available with both of my ATI and Nvidia cards. Are you able to see options for 1080i or odd resolutions such as 1360x765? Do they show up over the HDMI converter? If so I get much clearer text in either 1080i or with Interlaced turned on than with 1080p or 720p. I also get much better text with a lower resolution. I like 1360x768 or 1280x720 (interlaced! so it will have to be a custom resolution.)
About Interlaced setting: In my Nvidia driver settings I have an option to enable either Interlaced or Progressive for the current resolution. Progressive is SUPPOSED to be better, but often, what is better for watching movies is much worse for clear text reading (with my 32" LCD HDTV at least.)
FYI: Oddly enough I have enabled 1080i while using 1280x720 resolution, and I have 720i (which is not technically possible?) Basically you have to lower the refresh rate (I'm at 29hz.) These custom resolutions give me the clearest text for reading 8 feet away. If you want detailed info on my Nvidia settings to make this happen let me know.