You were right, I had to order Xbox RGB scart cable, thankfully they are cheap and not that hard to findsuperg wrote: PS2: check your firmware setting output video mode, it should be set to RGB, PS2 shares same wires for Component / RGBS pins.
Xbox360: This is RGBS switch, you have to provide full RGB input, passive composite / audio adapter to SCART doesn't transcode, it's just an interconnection of wires.
PS2 sorted itself out, I am not quite sure what happened. It was set to RGB all along, I fiddled with the Matrix firmware settings that sets the PS2 output and color correction, then after lots of befuddling and foolery it somehow started to work.
And this thing works like a dream lovely image&sound quality and super easy to use. I am loving this