Do this. You will need to have dgindex and Avisynth installed.

1. Rip your DVD with DVD FAB 7 (free version)

2. Pull out your required video and audio streams with Pgcdemux.

3. Load your MPEG-2 file into dgindex.

Video --> field operation ---> Forced Film

Save as whatever.d2v

4. Copy this script into notepad and save as whatever.avs

Loadplugin("Your_Directory\DGDecode.dll")
Mpeg2Source("Your_Directory\whatever.d2v")

The first line might be unnecessary.

5. Open whatever.avs in Virtualdubmod.

Video --> Compression --> Lagarith --> Configure --> YV12

This is if you want to stay in YV12. You will probably want to change to RGB if Vegas cannot handle YV12 AVI and convert it internally. As I said, I don't think it can.

(I check prevent upsampling when decoding if am creating YV12, but I don't think it is necessary. You don't check it if you are creating RGB.)

Save as AVI and make sure fast recompress is checked if you kept the file in YV12. Saving as normal recompress or full processing mode will trigger a conversion to RGB.

There are other ways of doing this, but I find dgindex is the most reliable way to remove pulldown flags.