Offhand I don't remember certain details to some of the questions that you asked ( two men walking...etc. ) as I would have to see it again.
But to give you a general answer; when the pilot / first season was filmed, the creators admitted that they were not sure if this show was going to even last one season. Therefore they probably shot and filmed the first season on a much lower budget causing the picture to look the way that you have correctly described.
There is no question that you can see a big difference in the much improved picture quality in season two compared to the lower quality in season one.
Good synopsis, DC.
I'll just add that the Pilot was shot in the Summer of 1997, the rest of Season One was shot in the Summer and Fall of 1998. The show didn't premiere until January of 1999, a full year and a half after the Pilot was shot.
You can really see the difference in the kids (A.J. and Meadow) if you look closely. Also, Tony didn't have sideburns in the Pilot. He did in the second episode.
