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Interesting solution you have there.
As for this particular source, I decided to just let it be as it was too much confusion on my part. Its worth noting I don't watch much on my PC, I encode for playback on my WDTV Live on a large screen (sadly I don't know its size haha) HDTV. Compressibility isn't much of a concern as x264 under CRF gives close to DVD quality results in the upper range of sub-1000kbps (on the TV). But I'll probably come back to this for future encodes I know will be pretty noisy as they were poor transfers to DVD.
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