All I know is what is written there, since I don't know the Editdroid team personally.
Knightmessenger: I am guessing they used the LD because there are some advantages over the official DVD. For one, there is better mid-range detail compared to the GOUT. The GOUT may have used the master, but the GOUT is still a transfer with it's own qualities, which makes it an intermediary, just like the LD. Since the detail level is the same as the GOUT but the grain level is not, I am guessing the GOUT transfer was put through sharpening processing to make it look better, which is why the grain is so overly coarse. Because ED2 is not just a straight capture--they put it in photoshop to use sharpening filters/contrast manipulation to boost the detail by 75%. But I am guessing the GOUT used a similar process by the equivalent of 100%, except there is a threshhold where picture detail does not increase and you just keep making the grain more outlined. So in this sense, it seems Editdroid's decision to go with the LD was a wise one. Number two, I think the LD itself had stabilization applied to it, while the master which the GOUT is based on did not. So again, the LD is superior. If you say that the aliasing is on the GOUT as well, then there really is no reason to start with the GOUT. The notion that it is more detailed is eroneous, as long as you can pull the LD into photoshop and tinker a bit (and, I must assume, have a really good LD hardware to begin with--no clue as to what they used). I guess Editdroid suspected that the GOUT transfer itself wasn't as good as the LD, and he kind of is correct.
As to if he used the same techniques on the DVD instead: all he did was really tinker with some contrast to bring out fine detail. But there is only so much detail to recover. The GOUT reached the point where no more image detail was coming out and you kept revealing successive grain layers, so there is a distinct ceiling. Working from the GOUT as the starting point, instead of trying to get more detail you are just trying to hide detail (grain reduction), which is a main premise behind G-Force project. Plus the stabilization, which was the starting point of G-Force, which you avoid if you go to the LD. You only have aliasing, which apparently GOUT has too. It was a missed opportunity by Editdroid to not smooth out some of that though, not sure why he didn't.
Darth Editious: Why would the floating probe droid indicate it's the 1997 SE mix. He says he used the 2004 mix, which has the droid. Also he said 120,000+ frames, the + being key. I don't know, maybe he had some friends of his cover the image restoration, and so the description is off. Or maybe he just did it that way. Is there a particular reason why you can't uprez it first before you start manipulating it?