What happens is that the picture returns to default "out of the box" settings, as the firmware update basically resets the picture. Since most people spend about an hour or so tweaking the pictures to adjust to black levels, color saturation, contrast, brightness and other detailed settings, the "out of the box" experience can definitely make you think, "Uh oh, I just got a bad picture out of this".
Initial reports of any firmware often comes with the "notice of a different picture", but it's likely because the settings were all reset, and not because the processing or picture quality is necessarily degraded.
I'm sure there will be at least one person who will challenge this thought, and it's certainly a "discussion of perception". However, in most cases, the picture quality isn't as good because the settings were reset.
Hope that helps.
I've read within topics on this issue but haven't seen a full thread for it. So my question to people out there specifically with LN46A850 who have upgraded or so...does it REALLY degrade picture as few people are saying. Doesn't make sense for a company like SAM SUNG to make something that will worsen there product. Highlighting on this issue would be appreciated.