yes you're right. I did zoom it in so the horizontal lines would be more apparent.
Okay, posting unedited images of both the DV source and the resulting MPEG2. The reason why I didn't post the DV source in the first place was that it's interlaced so it doesn't look that great on the PC anyways ^_^;;
Both taken using VirtualDubMod.
DV Source:
Resulting MPEG2: