Capturing from VHS into MJPEG YUV2, cutting the extra bits in VDub using direct stream copy, and using TMPGEnc to convert to MPEG2.

However, if I turn on noise-reduction in TMPGEnc with the default settings, the output looks "muddy" on my set-top player. By muddy, I mean that instead of red area flowing smoothly from light to dark, it appears stair-stepped. The DVD video looks much better in InterVideo WinDVD 4 on my CRT screen.

Is there some little thing I'm overlooking?