Vista - Why is my Live TV so poor quality?

I really hope someone here can offer me some help with this!

I've built a small htpc with a HauupaugePVR 500 Tunerand connected it (via my motherboards HDMI) to a Sony 40w4500 LCD.

The tuner is connected to my SAGAM set top box via a SCART to phono adaptor with s-video. There's no other way to connect the two together as my stb only has the following connections,
Digital tv broadcasts via a cable Sagam stb with the following connections,
Audio - S/PDIF, Right and Left audio connectors.
Video - HDMI connector, Y, Pb and Pr?
The only other connections available are 2 Scart sockets one labeled TV and the other VCR.

I've got a s-video lead plugged into the tuner card and the end of it plugged into the adaptor and the then the adaptor into the stb tv SCART socket.

With all this done I'm geting a pictures but is pretty bad. Quite fuzzy with faceting and stripy looking. When I use the phono video input it improves but it's still not a patch on simply connecting the cable box straight to the tv via scart.

Could someone tell me why my picture is so poor? Surely it's not supposed to be like this? The resolution I'm using is 1280x720 and I'm running Vista Ultimate. Could it be that the signal from my cable supplier is digital or something?

Any help greatly appreciated.