The movie looks B&W, the found footage doesn't look like found footage.

Agree on both aspects. The film itself was lit, or altered in post, to look somewhat colorless so then the switch to actual black and white (which for 1982 made no sense since color stock was easier to come by then than black and white) wasn't as jarring.

Also the old footage was not single angle, it had been edited and also many shots could not have been done by the tripod based cameras.

Add that to the story which ought to have been more about Sarah's arc but t turned out she knew all along what she had to do and never forgot, well it just came off as unreal rather than surreal.

The color grading was hideous and sometimes it would change suddenly. It just looked so bad. I wonder if they were filming some night scenes in the day and it has to do with the day-to-night conversion. It just looked so awful.

I agree with you, but they were both positives in my opinion. The near b&w, as well as the weird, subtle lens distortions gave this an otherworldly, kind of disorienting feel that worked well.

Re found footage, i absolutely hate that found-footage/faux-home-movie style (even though I've liked some films shot in that style, I still hate that style), so I couldn't have been happier that they decided to forgo that approach in favor of more traditional cinematography complete with multi-angle coverage, etc.