From Ash Greyson of DVinfo:
In general the XL2 provides EXCELLENT detail in both shadows and highlights, moreso than any other SD 1/3" CCD cam. However, most people are not used to this and to their eye, this image can look flat or milky. If you are one of those people, I suggest you play with the following setting combos...
Knee - HIGH, this will emphasize highlights (you WILL lose detail)
Setup Level - turn it down anywhere from -3 to - 6 (this will darken the picture, essentially crushing the blacks, you WILL lose detail in the shadows)
Master Pedestal - turn it down -3 to -6, (this will darken the shadows even more)
If people are looking washed out, you may be overexposing or what you may be seeing is increased detail due to a low knee/stretched black setting. Try pressing the blacks and turning down the Master Pedestal and/or setup level.
Master Pedestal and Setup level effect perceived saturation because they bring out detail in the default settings, more saturation in DV world = less detail. If you have a highlight or shadow that retains the detail information, that can look flat to some people.