Thanks for the additional information – this is very helpful. From the picture you sent it appears that the problem is not related to the colors at all what is the result of a mismatch between the resolution that Picapture is receiving and what the raspberry pi is expecting.
The first step is to make sure that you can get a clean capture with raspivid. You can use the video mode LEDs or the pivideo software to determine the detected resolution. You should be getting a good full screen preview before anything else. The command “pivideo -q all -v” will provide useful feedback about how the PiCapture board is interpreting the input.
Please note that although there is a “special” mode to capture 1080i at half resolution, interlaced formats are not supported by the HD1. The repeated, small blocks of video in the example you sent appear to be typical of a mode mismatch.
The next version of the HD1 firmware (currently under test) will support setting custom EDID blocks that can exclude 1080i for devices that do not support 1080p and so go to 1080i.