Update:
My hubby went and purchased a brand new Picturemate Deluxe from Costco as Epson still hasn't gotten back to us, this was suggested as none of the stores in our city do test prints, so this was the only way to do a direct comparison of this printer since no one we know has one.
I printed a bunch of photos on this printer from the memory card and USB thumb drive taken from computer as I just wanted to print from printer so as not to disturb anything in the box, etc. I got the same results with this new printer as well - I see grainy images and I can notice like faint lines on the photo. Nozzle check is fine just like other one. I printed out some photos that I had printed at Costco as well that came out very well, but not here.
I have come to the conclusion that either: 1) My photography equipment is possessed, 2) Picturemates just aren't as clear as I thought they were going to be and 3) Something is off with both my cameras - not sure about this as I have printed hundreds of photos from both cameras from Costco and they look great! and 4) We are too picky about our photos.
I want to thank everyone for their help - especially Safetymom and Kelly Grannel. My hubby is saying both printers have to go back and wants us to buy the Epson r1800, but it's a lot of money (almost $800.00 in Canada and $500.00 USD plus tax). I also have a $65.00 USD Picturemate pack ink and paper (270 photos) that I bought at Circuit City to use with Picturemate that I had to open in order to do all of these test photos, so now I'm also out that money as well. Very frustrating, indeed!!
At this point I believe that I'm not meant to print out photos at home at since things just haven't gone right from the start.
Thanks again, Tiger