I was having no end of trouble with my new Radeon 64DDR VIVO card with the macrovision loop problem, just like many people who have posted here.
My mistake (don't take this personally) was to follow the instructions posted on the web site for capturing using ATI cards. It states that you must get the latest drivers and MMC7.1. I did this and got the infamous loops.
I unnstalled everything. MMC, Drivers, registry settings and anything I could find using ATI*.* in the search function.
I then installed everything from the CD that came with the card. (doh!)
The video signal no longer flashes brightness etc, and the captures are fine.
The MMC that was supplied was 7.0, and the only problem is that it does not have the WDM drivers and so other windows capture software can't find the card. I'm sure this can be fixed though.

I am using Windows 98 (first ed), Athlon 1gig, Via chipset, SB64, Soltek MB and 256mb ram.

Hope this helps some other fellow ATI users.