Unplugging for an hour seems to have made the problem go away (for now) .... ie no fringing now + the unconnected DVD and Video2 RCA connection blue screens are all pure blue as they should be....
I can put off buying a new TV for now .... was looking seriously at buying a Samsung 42" full HD plasma or Samsung 37" full HD LCD (both about $1100, I'm sure if I offer cash , I can beat that price down to under $1000) . Would rather keep my $1100 for now.
Anything bigger will be way too expensive , overkill , too big for our lounge-room and would involve needing a new TV / Video cabinet/stand as well = even more expense !!! I don't want to have move my wall cabinet or have to get a new video cabinet as well , nor do I want to stuff about wall mounting a big plasma or LCD TV.
Edit : the signal (via the VCR and set top box still disappears occasionally .... get blue screen and sound only intermittently .... bummer ....
The DVDR C+VCR and set top box are new (less than 2 months old) so I think there is still an issue with the old TV .... will try connecting the RCA feeder from the DVDR C+VCR and set top box to VCR2 and see if this stops the problem .... crossing my fingers.