Problem identified - its the antenna preamp. When we unplug the ac cord to the pre-amp, the cable signal looks fine. The antenna preamp being used is some no name unit which does not have a grounded AC cord. Am wondering if perhaps a higher end antenna preamp might have a grounded ac cord.

Nueatit there are two signals coming in via two coax/RG6 cables: OTA from antenna (digital) and basic cable. The cable is ANALOG b/c the RG6 comes into the house and gets screwed directly into the coax input on the TV. There is no digital/HD tuner box for the cable. So we have two different signals via two RG6 cables but only one coax input on the TV. So we're using a 2-way splitter backwards to feed the OTA and cable into the TV via a single RG6 wire.