Deinterlacing with MeGUI
1) Open MeGUI, and go to Tools > File Indexer.
2) In the File Indexer, select your file. If your file is MPEG-2 (in
.mpg, etc) it should select DGIndex. If your file is H.264 (in
.ts, etc) it should select DGAVCIndex.
3) Set Audio to Demux All Track(s), then hit Queue. In MeGUI's Queue tab, hit Start, then wait. Eventually it'll open the AVS Script Creator and a window showing your video.
4) Using the preview window, skip through your video looking for a good example of interlacing. This isn't necessary but it demonstrates what is happening. Interlacing shows up best during horizontal motion. Here's some interlacing in a live video (click it to see it properly!):
5) In the AVS Script Creator, go to the Filters tab and hit Analyse. This may take a long time, but it only needs to be done once. As long as your input remains the same, the settings will always be the same, so you only need to do this once per game.
6) Once the analysis finishes, note down those settings (Interlaced, probably TFF, should be Yadif) somewhere. You can just apply them manually from here on out. Don't worry if your video is detected as Partially Interlaced. Do worry if it is detected as anything else. Hit Preview to make sure it's removing the interlacing.
7) If your source is ~1920 pixels wide (1080i), you may want to resize it down to 1280 pixels wide (720p). You can do that in the I/O tab. You can also crop the video here, but you shouldn't need to.
8) Hit Save. You now have an AVS that you can either use to encode, or open in a program like VirtualDub. You should also have an audio file ready to be encoded by MeGUI.