I have a Toshiba 40" 1080p HDTV which I have connected to my 15" macbook pro from a HDMI cable and a HDMI-miniDVI adapter.

So it looks like TV-->HDMI Cable-->HDMI/miniDVI adapter--->MBP

The MBP's resolution is 1440x900. In display settings, it says the usable resolution is 1600x900. Why doesn't the TV show in full 1080p (which is higher than 1600x900)?

Are you "mirroring" The video output? If so, then your tv will display the same resolution as your MacBook LCD.

Use "extended desktop" mode to be able to select independent resolutions for the LCd and tv.

Yep! That's it. I got the TV at 1080p now.Anyway to smooth these fonts a little bit on the TV?