Hmm, that's bad. Unfortunatelly, it's not that simple to detect whether a full-screen game is running (i.e. it's not such a simple feature you might think).
I know it's hard to say, but do you think it doesn't work at all for you, or it only sometimes fails? (I don't know how often you are playing... do you think that it already worked a few times?)
By the way, what exactly does it mean "saw blue box moving down through full screen game"? I mean - did it behave exactly the same as previously (when this option wasn't there?) The hard disk activity could have been caused by the VPS update itself...
What is the version of your DirectX / OS?