I have the same ATI card as you and experienced the same problem with MMC8.1 and MMC8.5 using WinXP.
The ATI website suggests upgrading to the newest Catalyst/Drivers and MMC8.7 to fix this problem. I tried just that and I ran into more problems and weird issues...like MMC reporting that my P4/2.26 GHz was not capable of MMX and I would drop frames at 15 - 20% on any type of capture. So, I went back to the last known good way for me to capture without any issues:
Win2k, WDM Capture Driver version 6.14.10.6201v1, Catalyst 3.6, DAO 8-1-0-0, MMC 8.5 (remember to load WDM first, dont reboot and then load the Catalyst driver and reboot). You can find these all here:
http://www.ati.com/support/products/radeonwin2kpreviousdrivers.html
This set up works perfect with no issues. I have tried several times to upgraded to XP and everytime I do, it never works properly for MMC. So I'll stick to what works.
Cheers,
gammer