Change the deinterlacing method on winDVD (auto to bob or weave, depending on what you want). The auto mode sucks. Some DVD software is better at deinterlacing than others, with winDVD you are either going to get blending of frames or jaggedness. The auto attempts to go between both, but ends up just sucking and looking terrible. You might need dvdGenie to do it, check out http://www.inmatrix.com/files/dvdgenie_download.shtml
The conversion from ~24 fps to 25 fps (r1 -> r2) caused some problems. It appears they blended each frame by 1/25 of the next frame and sped up the video for the animation parts (which in turn caused an increased pitch in the voices).
SQFreak: make sure you convert the pal to progressive by doing a field shift, then either drop 1/25 of a frame or make it play slower.