Arcsoft is set to MPEG. You cannot record in AVI.
The best settings are the default settings. There is a youtube video
http://www.youtube.com/v/zRA1g5mr9i4&rel=0You could also try another capture program:
It is free and good. It works on xp/vista/windows 7 (both 32 & 64 bit)
Debut
http://www.nchsoftware.com/capture/When you go to the site, don't click on the links on the right hand side.
There is a download link for non commercial customers in the first paragraph
on the page.
When you have installed, plug in the ezcap, open Debut, click on "device" at
the top.
If that gives you the same result, It would be worth doing as the seller suggested and purchase a "switchable scart to phono" lead. They are not expensive. If you are in the UK you can get one for £1.77 including postage from ebay. Set the switch to "out" so it forces the signal in the right direction.