By chance, do you have your TV2 line running thru a VCR and then into the TV2. If so, make sure the VCR is off. When the VCR is powered-on, it will interfere with the picture. If the VCR is off, and still getting a bad picture, disconnect the TV2 line from the VCR and hook it directly into the TV. Could the VCR is not passing the picture thru clearly.
Something else you can check, if you have a short jumper cable, hook-up your TV2 feed cable from the receiver to TV1 and turn TV1 to same channel and modulator (cable or air/antenna) that you have TV2 set on.
If you get a clear TV2 picture on your TV1, then the issue is somewhere between the receiver and the TV2 set, most like a bad connection or barrel in the line.
If you get a bad TV2 picture on your TV1, then the issue could be the TV2 output in the receiver itself.