I have the Vdigi VGA transcoder and with Soul Calibur 2 I get quite a bright image. Should I shell out the money for the Microsoft VGA cable? I'd love to see some pictures with the 360 using the VGA cable on the 2005.
On the display itself, push the minus sign ' - ' button and a Brightness / Contrast OSD window will appear. From there you select the brightness and turn it down.
In addition to that, you can do it through software like the others said.
Quoting this because I also am getting this same error. Downloaded the latest nvidia drivers and Direct X and still isn't working. running XP SP2 on an x64 as well. annoying; I just want to play.