It's a PAL-native machine from the UK, and the PAL output is in color. Is it normal for the color to go out of the picture when switching modes?
While the Amiga claims to be able to switch between PAL & NTSC, it's not really doing this. It only affects the frame rate.
All you are able to do is switch between PAL & PAL60.
I don't know if an NTSC A520 modulator is able to cope with running in 50hz & 60hz, but that may be an option.
An RGB monitor would be better, but buying an NTSC Amiga 1200 may be cheaper.