What software do you use?
I wasn't too impressed with my Tv-Wonder too when I used ATIs own software (which was unstable too, but that's another matter) but when I set up DScaler the picture quality suddenly was very good. Get Dscaler if you haven't got it and see if you don't get better picture quality with that prog, for me it made a very noticable difference, suddenly video-in was clearer than a normal tv-screen.
Btw, this really belongs in the Video-forum.