I have upscaled movies i have downloaded to h264 codec on HD video converter factory and some other converters and found the BD 370 playing back this codec really grainy and jerky. I moved back to more legacy codec mpg container with mpeg4 codec.
Last night i upgraded my BD370 software from the Firmware Updates that were available on the LG website for this player.
So i updated the special first and then the Actual update. Tried the test i did with upscaling a SD file to HDmpeg4 container with H264 codec.

Resolved, no more grainy video. Quality of H264 awesome on playback. I am in Southern African and i first emailed LG with the question if i would loose USB movie playback option and the replied confirming USB movie playback will still work.

I tested my USB as well after the upgrade and it worked.

So i am posting this post for anyone that has this BD370 player, that are experiencing h264 grainy playback problems can be resolved by updating the Firmware as per the LG's website for this player model.
br.