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You used the wrong version - use utvideo ULY2 for 8bit 4:2:2 . You can convert it in vdub2 to ULY2
UMY2 is the T2 version of utvideo and not supported in VLC . VLC does not use installed codecs, and you already have utvideo installed because you can open in vdub
ULY2 will show up as "UTVideo YUV422 BT.601" in the vdub compression menu . When you click on it, on the right side it will show fourcc "ULY2" . Converting UMY2 <=> ULY2 is lossless
The "negatives" are lower compatibility in some cases - you can see that with VLC
For SD VHS capture on modern hardware, you don't need the extra speed . But it might make a difference if you were using older hardware - if you were using something very very very old and slow, it might mean the difference between dropping frames or not.