MacOS 10.7.x Lion introduced big changes in the capture process from Snow Leopard. You can read more here. iShowU HD on Lion makes use of a new capture system called "AVFoundation".
One of the more "annoying" aspects of this is DRM. You can observe a classic case by previewing the DVD Player in Lion. You'll get something like the image below.
This is not unique to iShowU
Other apps (e.g: Skitch) will also not be able to capture images from the DVD Player. This is a restriction placed into the OS by Apple.
The workaround is to playback video using VLC, and record that.
The results of which can be seen below: