Hi OCB and welcome to wetpixel. I am pretty new here too.
I am on the same road as you. I cannot speak as an expert, I can only describe my experience so I hope that is some assistance.
I find the in-case flash has too much backscatter most of the time and not correct colors when I do not use it - as you have found. It is also not strong enough.
What could have been good photos are not due to those issues, same as yours.
So I bought a sea and sea YS-25 and the results increased markedly..but far from 100% satisfactory.
I am less than perfect at alignment with strobe and camera though I do focus on that point.
I also started using Lightroom recently and really like the results. It helps clear out backscatter and correct colors. when its not starting from a total mess. I have not had great results when colors were way off, as in over 40 ft deep and no flash at all.
You can see some results on my flickr page. I have only added a few photos there so far.
http://www.flickr.com/photos/25225664@N05/
(please let me know if that link does not work)
On-camera flash:
The lemon shark was with the camera strobe with LOTS of backscatter, all a bit too far away. As you can see with that shark photo, I have been messing with white balance but have yet to find the balance that has the shark and the blue behind him with proper color. The blue is too purple in this depiction but the shark is OK. When the color is blue, the shark does not look right. If you look careful, you can see the circles where I removed with backscatter which took FOREVER messing with it..with fair results.
There was MASSIVE backscatter but I will not be in Moorea again soon nor have a shark with a fish hook in his mouth swimming by soon. OH..., to have had the off-camera strobe back then...
No flash:
In the clownfish photo, it was taken before I owned the YS-25 (like the shark) and due to backscatter concerns and the shallow depth (20-30 ft) I shot it without flash. Still not able to get the color balance correct in all areas, as you can see, even using lightroom.
Off camera flash:
Compare the those to the Stoplight Parrotfish, shot close with the YS-25. Colors are balanced with a very slight adjustment in Lightroom. A few min. was spent clearing up very trace backscatter and the average person will not find the corrections.
I strongly recommend a fiber optic driven, off camera strobe. Only using one strobe has its issues but you might start with one and see how you like it.
You may note the Kansas Lionfish on the flickr page. its a small species, limited to eastern kansas swimming pools, at 2-4 ft depth. Note the purple string 'bladder' for depth control. This fish allows very close approach by divers which is nice for strobe testing.
Those 2 shots were with an Inon Z-240 which I am learning to use, a recent purchase.
Too far away:
As you can see with the white spotted file fish, he was too far away for the YS-25 strobe to light him up well compared with the background but at least there are some decent colors and no backscatter issue.
You can see a bit of the strobe power difference with the lionfish (Z-240) vs the other strobe shots (YS-25). The lionfish was in a well lit pool in 2-3 ft of water yet you see no background colors in the close photo and only slightly in the second. I was using f8 and the strobe could produce plenty of light.
I could not take photos from very far out with the YS-25 as its far less powerful than the Z-240.
With the YS-25, I generally shot at f2.8 and left it there since the flash was not powerful enough for most other selections. It is easy to use as you set the strobe and camera and fogert them...just take the photos. Good enough for a vacation photo guy, which sounds describes us both.
I have not tried the magic filters so far but have only learned the same as you, by reading here and their website.
I am hoping to go to 2 strobes to solve one of my issues. Having one strobe, low backscatter and the subject well lit is more difficult than I had expected.
Put the strobe shooting too close to the lens and you get backscatter.
Put the strobe out further and a quick fish coming close is not lit properly but could be great...if only...
I plan to sell the YS-25 setup and by another Z-240 before I visit the ocean again. Thus having 2 strobes that match and hopefully, improving the results a bit more but certainly at a cost.
I hope this is of some help.
Diver dave1