Yes, the streamed image is very strange, mostly black and blue but the shapes are close.
To one of your original issues, the "jigsaw" effect, I had jpg's that would fit that description at first. The conf file I posted has daemon off and setup on so you get lots of debug messages. I was seeing
[1] [NTC] [VID] v4l2_set_pix_format: Config palette index 0 (S910) doesn't work.
[1] [NTC] [VID] v4l2_set_pix_format: Supported palettes:
[1] [NTC] [VID] v4l2_set_pix_format: (0) MJPG (MJPEG)
[1] [NTC] [VID] v4l2_set_pix_format: 0 - MJPEG (compressed : 1) (0x47504a4d)
[1] [NTC] [VID] v4l2_set_pix_format: (1) YUYV (YUV 4:2:2 (YUYV))
[1] [NTC] [VID] v4l2_set_pix_format: 1 - YUV 4:2:2 (YUYV) (compressed : 0) (0x56595559)
[1] [NTC] [VID] v4l2_set_pix_format Selected palette YUYV
[1] [NTC] [VID] v4l2_do_set_pix_format: Testing palette YUYV (320x240)
[1] [WRN] [VID] v4l2_do_set_pix_format: Adjusting resolution from 320x240 to 1024x576.
[1] [NTC] [VID] v4l2_do_set_pix_format: Using palette YUYV (1024x576) bytesperlines 2048 sizeimage 1179648 colorspace 00000008
when I found the correct palette (for me 8 was the magic number) the jpgs were a lot better, then I used the control interface on port 8080 to adjust brightness, contrast, etc to get to a "good" image. The palette is set down around line 70 in the conf file.
Motion can be really cranky until you get the setup right!