retartedted said:

Here is a sample of what the completed MKV set will probably look like

Looks very good, these Japanese tapes are definitely the way to go. I can see a little of the haloing that you mentioned in a previous thread, but it's not really noticeable.

My media player (MPC-HC) played this back at the wrong AR, not sure if that's the fault of my player ignoring the aspect ratio flag, or if you didn't set it in the MKV in the first place (I didn't have time to check). Since compatibility with AR flags generally can be hit-and-miss, I would recommend you resize to 640 x 480 before encoding. Since the source is VHS which has limited horizontal resolution anyway, you wouldn't lose any detail.

Maybe consider the use of AAC instead of AC3 for audio, and MP4 instead of MKV for the container (formats that the pirate "scene" is now moving to - look up the SD x264 TV Release Standards 2012).