You're only one of two people I've heard to ever try using a TV capture card. The other guy had no troubles.
Try looking through the options (of the capture program or the drivers) and see if you can find anything dealing with overlays, and try different settings with them. Disabling overlays or hardware acceleration fixes the 1/4 screen problem with pre-recorded video. Also, try running in 640x288 mode, as the problem lies with ATI's handling of interlaced video.