What I've seen before was the problem with the preview window in the Instant DVD Recorder being Black and White only. It was solved by downloading software called "amcap". The program allows to get colors in your xbox video.
How to solve the Black & White problem with xbox 360 and Dazzle DVC 100:- Download and install "amcap".
- Launch "amcap". Ignore any error messages.
- In "amcap" go to "Options" -> "Video Capture Filter".
- Select the "Video Decoder" tab.
- Click the box that says "NTSC-M" and change it to "Secam-B".
This needs to be done repeated every time your preview windows becomes black and white.
Do you have the same problem?