Good points.Of course it's about insufficient bitrate. MPEG family encoders all use the same basic techniques (DCT, motion vectors) to compress video and all deliver close to the same quality given enough bitrate.
NTSC VCD will always be 29.97 fps. So with film sources you usually have jerky motion with a duplicate every 5th frame. Or even worse, two blended frames out of every size from simply downscaling interlaced 3:2 pulldown video.
Your example uses noiseless animated material with a 2.35:1 movie letterboxed in the 4:3 DAR frame. Both those things require a lot less bitrate than your usual 4:3 source. That's not representative of your average VCD.
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