I have not been able to locate a manual for the kit and can only suggest a possible explanation. I believe that it has in-built Freeview but you have not said that you have connected an aerial to it. This being the case, it is highly probable that the AV1 input will route signal to be recorded and that AV2 only will output from a played recording. In other words, there is no direct loop from AV1 to AV2, as would seem to be necessary for your set-up to work. Try a recorded DVD in the machine and see if it is displayed on the TV. I believe that your Virgin box needs to be connected to the TV for normal viewing and also connected to the Wharfedale for recording. I assume the Virgin box has two video outputs.
The Evil Within 2 review-in-progress