Black screen when trying to deinterlace in WME 9

Hello,

When streaming live video, the quality is very poor (grainy, choppy, etc.).
We have tried to select the deinterlace option to help the picture, but when
we do the picture disappears and all that is left is a black screen.  The
picture does not come back unless we de-select the deinterlace option ...
Any ideas as to why this is happening?

Here is our laptop specs:

HP Pavilion dv6 Notebook PC ??? Intel Core Duo CPU 2.00 GHz ??? 4.00 GB RAM ???
running Widows Vista

Here are the set up instructions we are asked to follow:

Open Windows Media Encoder
If Encoder Wizard pops up Cancel

On Encoder Home Screen Click ???Properties???

Click ???Sources??? Tab
In the ???source from??? section choose ???Devices???
Check in Video and Audio box
Using the Video drop down menu select your Video equipment
Using the Audio drop down menu select your Audio equipment

Click ???Output??? Tab
Check ???Pull From Encoder??? box
Check ???Archive to File??? box
In the ???Archive to File??? section type filename using this
format
Date(102505)_Sport(MFB)_Full game or Press Conference(FG,PC)_School
Ex)102505_mfb_fg_ttt (no capital letters and no spaces)

Click ???Compression??? Tab
On ???Video??? drop down menu select ???VHS Quality (CBR)???
On ???Audio??? drop down menu select ???CD Quality (CBR)???
On ???Bit rates??? section check 400Kbps???
On ???Bit rates??? section remove check from ???300Kbps???
On ???Destination??? section click ???Edit??? button
Click ???282Kbps??? tab
Change ???Video Size??? section to 400 X 300
Change ???Key Frame Interval??? section to 1
Frame per sec.
Click ???OK??? and return to the properties screen

Click ???Attribute??? Tab
Click on ???Title???
Click ???Edit??? button
Type in School Name
Click on ???Copyright???
Click ???Edit??? button
Type in the current Year

Click ???Processing??? Tab
On ???Video??? section choose ???Deinterlace???

Click ???Apply??? button on bottom of the Properties screen

Click ???Start Encoding??? button on Windows Media Encoder Home Screen