I used force film as per neuron2's advice. Then I dropped all consecutive duplicate frames and used timecodes. Video playback is the same whether I drop frames and use timecodes or not. The encode plays as smooth as the orignal DVD, check the mpeg-2 sample. The advantage of dropping duplicates is there is less to encode, the result is a smaller file size with no loss of quality.
I'm not sure I should be getting rid of grain on this source either. It doesn't look like intentional grain to me (i.e., something that should be there), it looks like noise/dirt. If I encode the source with no filtering then the bitrate required is enormous to keep good quality. The source is pretty disgusting. I tried mvdegrain but it seemed to remove more detail than temporaldegrain. What should I use instead of deen?
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