According to everything I've read, this is pretty much par for the course. I'd rather leave the film interlaced, than introduce video artifacts. Considering the work I'm doing cleaning the film frame by frame, the last thing I want to do is gunk up the picture with unnecessary garbage.
"Use Virtualdub: Frame Rate:IVTC adaptive.
**This seems to remove a large amount of the interlaced frames (their removal is base on them being duplicate frames)
**My source is showing 2 of every 5 frames is interlaced ( I assume this is standard for telecined video)"
If you know the pattern, then don't use adaptive - it tends to lose the cadence occasionally. Go to manual, and start with a setting of 0. Do a direct stream copy and watch the picture. If you see artifacts, then go back and try a setting of 1, and so on. When you get the right number, there will be no artifacts. Let it keep working until it's finished.
Sometimes, as is the case with the LDs, the cadence will change. Simply fast forward through the video until you see artifacts again, and repeat the procedure from this point on. Later on, you can cut the videos at the appropriate points, and then append the good segments together. My masters have ZERO IVTC artifacts using this method.
Looks like Zion's is similar to my method. I was just too lazy to look for the P frame. You can see almost immediately if you got the right cadence or not anyways. Off the top of my head, I remember a cadence change between the time Luke talks to Han and then talks to Leia on Yavin IV before the battle.