If it looks correct on the TV passthrough output but funky on the capture then there are two likely points of quality loss:
- the device's color sampling, especially from the on-board hardware H.264 encoding (every USB2 HD capture device suffers from this in particular)
- the software video compression (codec and other settings)
If your preview screen on your PC looks fine but the output file looks poor, then point 2 is the likely culprit (and can probably be fixed). If your preview screen already looks fucked up then it's probably point 1.
No capture card can deliver full RGB quality (unless you're using professional equipment that commands prices of four figures or more). They pretty much always sample the colors in such a way that greatly reduces USB bandwidth at the expense of some color loss, typically some white and black crush at the edges of the RGB spectrum, and sometimes more pronounced loss on some colors than others. I have a section on my review of the
XCAPTURE-1 that goes into some detail on how good/bad its chroma subsampling is, how it scores on color tests on various consoles, and how it compares to the Intensity Shuttle. (You'll notice that the XCAPTURE's YUY2 color sampling tends to show particularly weak results with bright greens and dark reds in most configurations.) And the Elgato is going to be worse than either of those devices because it's USB2.
(As an aside, I'd be more concerned about the wretched sound coming out of that Genesis 2, personally.)