That certainly isn't a high bitrate signal.
I experienced almost exactly the same symptoms that you did a couple weeks ago, but I can't remember what I concluded. I think I posted about it somewhere. I generally don't use my Azbox for recording, since I generally only watch medium to high bitrate HD stuff, but someone asked a question about recording, so I tried recording something, and the Azbox froze up in mid recording. Tried it 2 or 3 times with same result, but finally did something an I *THINK* I got it working, but I'm not sure. I may have switched recording devices... I think I was trying both a thumb drive and a ~ 80 GB hard drive.
I can't remember what it was that I was recording, but I know it wasn't the Telarity Encoded thing, because that's pretty poor quality video, generally not worth recording.
Anyway, I doubt that the problem has anything to do with that signal, unless the Azbox is getting confused due to errors or something.
I'll search back in this, and other forums to see if I can find a post where I described what I observed, because I can't believe that I would have a problem like that, and leave it unsolved or not discuss it on a forum.
EDIT: I searched, and found post # 2139418 . Apparently I observed the problem when using a suspect thumb drive, but the problem cleared up when using the 80 GB hard drive. I've never tried a 1 TB hard drive on the Azbox. It seems like most of the people that have posted about problems seem to be using the 1TB drives. I'd consider using a smaller drive.