So, with the same cable and display the RPi4B working well and the RPi3B+ not. Maybe is something wrong with your RPi3B+. Did you tried with something else, like the "Raspberry Pi OS"? Just to check if with another OS you get the same issue. I'm using now RPi3B, RPi3B+ and RPi4B (now with the latest LE12 nightly), and only once had a display detection issue (last year, cheap bad HDMI cable).
You might be right about this. I tried different displays and cables and it's always the same, 4B shows HD resolutions and 3B+ only up to 1024x768. The streaming blur seems to be a different problem though, because other videos still play correctly despite the resolution issue.
Bingo! RPi4 can play 4K, but RPi3B+ can't. That's part of the official hardware specs.
Please pastebin a Kodi debug log that shows this stream being played.
Even 640x480 stream showed the same problem on the 3B+. I will upload a recording and log later when I get to it.