Regarding s-video vs composite, it depends heavily on the quality of the comb filter.
VHS is a composite format, period. Splitting it into separate luma + chroma requires a comb filter, and it either happens on the player when you're making S-Video, or on your capture card.
Old laserdisc players for example had shitty comb filters by today's standards, so with a pro capture card you'll get much better results with composite. Not sure if that's the case with your basic capture device
Try it both ways and see which method produces less dot crawl.
Regarding compression, HEVC is a good fit for this if you don't mind spending the compute. Use 10 bit. With an i3 doing the encoding I'd say it's overkill though
Why do you want the bit budget to be so low? You're using QTGMC so presumably you do care about the quality!
I'd have transparent quality be a top priority. Just use low CRF encoding with x265 or x264.