[doveman2]

It seems the Pi is still clipping my black levels, despite setting
hdmi_pixel_encoding=2
in config.txt, which is meant to be RGB Full (0-255). I'm testing with a black clipping pattern showing levels 0-25 and when I play it from a USB stick on my TV, if I increase the brightness the lower bars will show up as grey rather than black but via the RPi, it doesn't change which bars are visible at all. Is there another setting in XBMC which would cause this?

I've also found that with my TV (Panasonic X60B plasma) that playing the pattern via the RPi and setting the brightness to +2 - +4 shows noise/snow (dithering?) all over the picture but playing it via the TV's USB port this doesn't happen. I also see this noise on the XBMC menu background.

EDIT: Another thing I've noticed is that the thumbnails in Videos - Files look like they've had the brightness boosted, so that they look very different to how they do when played. I took these screenshots in the list and with the videos playing to show the difference.

I think the x60 doesn't support full RGB range. So you should remove hdmi_pixel_encoding=2 and choose from the xbmc settings limited color range [settings/system/video output - enable use limited color range (16-235)].
I'd also suggest setting contrast and brightness at 50 on xbmc and whatever calibration you do do it from tv's menu.
(Panasonic UT30 plasma owner here, everything is good with the above).

Yeah it does, it has the option to set it to Auto, Full or Normal. Auto correctly sets it to the same as Full and Normal is clearly wrong as all the bars from 17-25 are completely black.

Nonetheless I tried removing the hdmi_pixel_encoding setting. After that, I had to manually set the TV RGB mode to Normal as it was still Auto setting it to Full. With the limited range output with the default pixel_encoding settings, obviously that doesn't output anything below 16, so increasing the brightness doesn't make the bars below 16 visible but it should when using hdmi_pixel_encoding=2, which is obviously changing the outputted range but it seems that something further down the chain is cutting off everything below 16.

I haven't even seen any contrast and brightness settings in XBMC, where are those? I also don't see any "enable use limited color range" setting under Settings/System/Video Output.