After a restart of the application the icon on the lower left indicating encrypted/FTA started switching every few seconds again. Is it supposed to do that?

Try using this version instead: http://download.progdvb.com/ProgDVB4.88.6Std.exe

I have the exakt same problem as you with 4.88.7 (using a WinTV Nova 500) and have had it with several versions for a long time (think it started somewhere around 4.84). Some versions have this problem and some not ...