Oddly I couldn't reproduce the clipping anymore on my new test captures. The blown up red on both NTSC_M and NTSC_M_J versions are recoverable now. So it seems like color adjustment can be done after the conversion without problem.
Switching RGB mode in Lagarith setting to YUY2 mode makes no difference in file size.
Another thing I found is that if I load in my original capture Lagarith file and run ConvertToYV12(), the default "interlaced=false" parameter will cause chroma ghosting.
Code:
AVISource("source.avi")
ConvertToYV12(interlaced=false)
tfm()
tdecimate()