Wow... I can't believe how long it's been since I opened this thread. In that time I've moved from Kansas to San Francisco, lived here for a year, and found a new game that has the same problem! If anyone has a copy Disgaea for the PS2 causes it as well.
I've basically learned to just live with it, albeit unhappily. Since it's only a few games I just keep the PS2 plugged into the front inputs and swap it over to the TV (which also conveniently has front composite inputs) whenever I need to. With the Gamecube I have a spare cable and I just swap that out while leaving the regular one plugged into the 1070.
It just looks like, for whatever reason, the 1070 has video problems with certain... well... I don't even know what triggers it. Not hardware alone, but it looks like a certain kind of signal somehow makes it go a bit loopy. Literally.
I still don't think there's any way to fix this and with the way things have gone and the 1070 discontinued it doesn't look like it'll ever be fixed. Hopefully when the new receivers and pre/pros come out (and with the increase in Blu-Ray adoption it looks like that'll be rather soon so they have products that support TrueHD and DTS HD) they won't have the same problem. Until then, well, hopefully you can find a way to circumvent the problem and learn to live with it. Not what you want to hear for the kind of money we're spending on these, but sadly, it looks like the only answer.