S-video seems to be the way to go with the D925, other players might give different results. This is where we miss Laserman's experience - I remember him mentioning an industrial player that had a very clean composite signal, but can't find the post now.
You might be able to improve the look of laserdisc on an LCD screen by using a separate video processor/scaler. Or you could capture the disc, process the video digitally, encode to MPEG-2 and burn a DVD.
I don't know much about demodulators. In theory, as the AC3 is digital, there should be no quality difference, the only differences being in connections or features like autoswitching. I might look into getting one at some point but they don't turn up very often on eBay. Going back to your first point, only NTSC laserdiscs can have AC3 tracks, PAL discs are PCM or analogue only.