I have almost exactly the same problem. My Dazzle card was working lovely when the PS3 was connected to the TV via Ext 1 with a scart lead and the TV was connected to the Dazzle with a 3 core from the Ext on the side of the telly.
Now we have a new HD telly and the PS3 is connected to it with the HDMI lead. The new resolution is brillient for playing PS3 games and we're really pleased with it.
What we can't do now though is get a signal to the Dazzle. Is there a way of setting the TV up so that it can output from a scart when the input is through the HDMI?
TIA
Graeme