The S-Video will only work if the machine is an S-VHS machine. If it isn't then the picture will be in black and white. In this case you will have to use the composite out of the converter.
If your machine is S-VHS however then maybe the problem could be betwenn the VHS machine and the monitor.
They only other possibility could be a faulty S-Video connection on the DV converter. Try conecting the S out straight to a monitor and see if it's colour or b/w.
Full Specs: 3.2 Pentium 4 Processor, 1Gb RAM 80Gb Root Drive, 120Gb Video Drive + another 160Gb external, Adobe Premiere Pro, Pinnacle liquid edition pro, ati radion 256mb