What software are you using to convert?
You usually use Xvid codec so check on the configuration screen to see if has a interlaced source option. I know divx does.
As for encoding software I use Divx converter (you need the mpeg plugin for VOB files), Nero Vision, or Virtual Dub mpeg-2.
Divx is the easiest. Just drag and drop, adjust to whatever settings you want, and convert.
Nero you can edit your vids and export. The only issue I've had with it is I can't get mp3 audio on exports. I have to use AC3 which is okay, but some people don't have the codec and won't get audio fromt the clips.
Last, is virtual dub mpeg-2. It's pretty simple to use if you learn it. V-dub is good since because it has a bunch of settings. I use it mostly on vids where the audio is off sync since it has adjustment for that. Plus it's free.
