There was also the dreaded rainbow no signal issue
Yes i know about that, it happens when in this case your HDMI2AV converter doesn't see videoactivity on HDMI channel. Then you see this rainbow, its not coming out of your grab device. The rainbow is only showing when something happens in video transmitting like defect or not working correct ( cheap) Amazon or Aliexpress splitters. Believe me i had some setups/Hyperion.NG type and splitters tested.
your other question; i am saying that you will come to a result with HDMI/USB grabbers but it will probably not be to your whole liking as before. Thats why i decided to do it the "analog" way and use 2 devices for rendering on the PI. My mate has also a setup with APA102 lights but he uses ( i experimented with that too) a HDMI grabber, his colours are pale in comparison to mine and what he tries and tries he doesn't come to the same endresult.
so i am saying that if you want some high quality image, dont go for a cheap(er) sollution (HDMI grabber for 15$ or less...) but invest some more on your build
goodluck man.