How to properly convert interlaced MPEG to AVI?

[lovyagin]

Hi everyone, I've got a big question, could you help me please?

I have an interlaced MPEG-2 video source I've captured from TV using my hardware recorder. As I hope to reduce it size without any significant quality loosing by converting it to XviD (well, as it was announced MPEG-4 codecs should let me do it, isn't it?). I chose XviD, not x264, as this is the only way to let my hardware DVD play it to TV.

The problem is: how to keep proper framerate. Usually they advice to deinterlace source and produce progressive AVI, but, as I write before, deinterlacing do reduce motion quality, making it less smooth, even jerky. So, this is not a solution.

So, what way should be best of all for me?
[*] Try to make interlaced AVI (mark "interlaced encoding" in XviD settings)

Problem: this video won't be well-playable on computer, also some hardware payers may not recognize it properly.
[*] Convert video to 50 fps by such kind of script

DirectShowSource("<...>.m2v")
SeparateFields()
Lanczos4Resize(720,540)

Problem: quality may be reduced by enlarging each field to whole frame. Hardware player may not understand 50fps video at all.
[*] To abandon this idea at all: there is not way to reduce video size without quality losing, either picture or motion or both would be worse on AVI then at original MPEG-2, so I should stop of dreaming of unnecessary DVD-disk saving. It's better to author interlaced DVD and this is it.

Problem: so many people want to converting their videos to AVI, why?
[*] Well, any other idea?

[guns1inger]

I just use AutoGK for Xvid/Divx conversion. I am happy with the results.