*hates DRM* If I were you I would acquire the latest version of Sentui, and rip that obnoxious DRM off your video files. Then you can play them in VLC, mplayer, etc, and do with them as you need to. iTunes itself is causing the checkerboarding you see, to prevent you from doing exactly what you are trying to do.
I don't know if Snapz Pro will scrape that, but I am inclined to doubt it, since it's itunes talking with the screen reading APIs and telling them to deny that region of the screen to you.
