DO NOT dilute Image Armour. it is made to be used straight out of the bottle. DuPont, you could dilute up to 50/50, but not IA.
it sounds like maybe you are using a bit too much pretreat. We've done a lot of light colored shirts, including white, and haven't had any issues with yellowing. like Mike said, heat could also be your problem. i had a light orange shirt stain a bit, and it did come out in the wash, but you don't want to have to pre-wash your shirts, so try backing off on the amount of pretreat, and check your temps.
my process is i dry the pretreat at 330 with heavy pressure, and i cure my prints at 330 for 90 seconds (per layer) with very light pressure.