From a couple of experiments I don't think I can display much beyond 900 pixels- I'm pretty sure this is because I'm using a byte of memory per pixel and there's only a kilobyte of ram- maybe you have less?

But for the two shades of gray each byte of memory could be 4 different pixels, so if memory is the problem resolution should be able to go 4 times as high like this:
      PORTB = (fb

• [y]) & 0x3;

     PORTB = (fb

• [y] >> 2) & 0x03;

     PORTB = (fb

• [y] >> 4) & 0x03;

     PORTB = (fb

• [y] >> 6) & 0x03;    

A for loop to draw the screen didn't work for me but I didn't play with timing with it much.

delayMicroseconds of less than one microsecond also didn't work but I also didn't experiment much.
 Assuming you can get more horizontal pixels (or you could repeat the pattern horizontally) I think the best thing to do is just get rid of the delays, and the delay of setting PORTB is the limiting time for horizontal resolution- though I'm seeing some strange things doing that while trying to repeat horizontally- the second set of pixels comes out thinner.

The cli() command seems to work for me, though I have a brand new diecimilla i think with the 0009 (?) firmware.  I haven't seen any of the odd failures you mention.

From my experience the top lines are curved because of the length of your vsync too short and it curves one way and too long it curves the other way- I made a little video of the effect-

I haven't implemented pong, but I've got video output working for NTSC.  What I've done so far is easier than pong because there are none of the branches in code that have to all meet timing, but I'll play with that later.

Code:
http://binarymillenium.googlecode.com/svn/trunk/arduino/videontsc/video5from3.pde

Video, with incorrect timing demonstrated:


Writeup:
http://code.google.com/p/binarymillenium/wiki/ArduinoVideo