I opened the VGA001 up and noticed the same thing koef did - there are pads for 2 surface mount resistors and 2 surface mount switches.
I think his monitor was the problem though.
I put an 0-scope on the green output, and found a very clean signal (with even the sync on green stripped properly) - something the Vdigi does not do. However, in VGA passthrough mode, the transcoder seems to lower contrast a bit so whites are somewhat greyer. On the o-scope the VGA passthrough signal is about 83% of the amplitude of VGA straight from the PC's video card.
I tested the transcoder on a crt with Xbox media center, and switched resolutions between 480P, 720P, and 1080i. All 3 resolutions displayed correctly (although my crt stretches 16:9 to 4:3). I noticed the picture is identical to the Vdigi unit and a X2VGA2 - I do still get crushed blacks - but I'm almost convinced it is not the transcoders fault. I think it depends on the monitor.
Reason being is, I have tested a home-made transcoder, the Vdigi, X2VGA2, VGA001, a Viewsonic N6 video processor, and even modded my Xbox to output in VGA mode. ALL gave me crushed blacks with my LCD and CRT.
Another thing that backs up the "monitor crushes blacks" theory: People complain that the Xbox 360 washes the image out when the VGA cable is used vs component out. After looking at several screenshots of component vs VGA, it appears Microsoft either increased the gamma or changed the black level on VGA out, so when played on a PC monitor, the 360's blacks are not crushed.