My friend wanted help with his encode of Rurouni Kenshin and asked for a sample episode.

Encoded using MeGUI

First thing I did was crop and resize the video
crop(14, 8, -14, -4)
LanczosResize(640,480) # Lanczos (Sharp)

This removed any pillarboxing and got me a correct aspect ratio of 4:3
only the sides needed to be cropped but I had to crop the top and bottom to get a 4:3 aspect ratio.

Because the FPS was a constant 29.970 and not variable I straight deinterlaced
Set to Interlaced, bottom field first, Yadif
Yadif(order=0)

Filters used

BiFrost(interlaced=true)
to remove rainbowing

VMToon (strength=24, thinning=12, sharpen=false)
to darken lines and bring out background detail and to offset detail loss due to compression

LimitedSharpenFaster()
to offset any blurriness due to compression

Tweak(sat=1.2)
to offset any color loss due to compression

All the detail loss and blockiness in your first video was because you used bad encoding settings just copy settings provided below and your vid will improve dramatically also stop using handbrake.

Video
ID : 1
Format : AVC
Format/Info : Advanced Video Codec
Format profile : High 10@L3.1
Format settings, CABAC : Yes
Format settings, ReFrames : 8 frames
Codec ID : V_MPEG4/ISO/AVC
Duration : 24mn 1s
Bit rate : 1 753 Kbps
Width : 640 pixels
Height : 480 pixels
Display aspect ratio : 4:3
Frame rate mode : Constant
Frame rate : 29.970 fps
Color space : YUV
Chroma subsampling : 4:2:0
Bit depth : 10 bits
Scan type : Progressive
Bits/(Pixel*Frame) : 0.190
Stream size : 301 MiB (80%)
Title : Rurouni Kenshin 01
Writing library : x264 core 138 r2358 9e941d1
Encoding settings : cabac=1 / ref=8 / deblock=1:0:0 / analyse=0x3:0x133 / me=umh / subme=11 / psy=1 / psy_rd=1.00:0.00 / mixed_ref=1 / me_range=24 / chroma_me=1 / trellis=2 / 8x8dct=1 / cqm=0 / deadzone=21,11 / fast_pskip=0 / chroma_qp_offset=-2 / threads=6 / lookahead_threads=1 / sliced_threads=0 / nr=0 / decimate=1 / interlaced=0 / bluray_compat=0 / constrained_intra=0 / bframes=5 / b_pyramid=2 / b_adapt=2 / b_bias=0 / direct=3 / weightb=1 / open_gop=0 / weightp=2 / keyint=300 / keyint_min=29 / scenecut=40 / intra_refresh=0 / rc_lookahead=60 / rc=crf / mbtree=1 / crf=18.0 / qcomp=0.60 / qpmin=0 / qpmax=81 / qpstep=4 / vbv_maxrate=17500 / vbv_bufsize=17500 / crf_max=0.0 / nal_hrd=none / ip_ratio=1.40 / aq=1:1.00
Language : English
Default : Yes
Forced : No

Audio #1
ID : 2
Format : AC-3
Format/Info : Audio Coding 3
Mode extension : CM (complete main)
Format settings, Endianness : Big
Codec ID : A_AC3
Duration : 24mn 1s
Bit rate mode : Constant
Bit rate : 192 Kbps
Channel(s) : 2 channels
Channel positions : Front: L R
Sampling rate : 48.0 KHz
Bit depth : 16 bits
Compression mode : Lossy
Stream size : 33.0 MiB (9%)
Title : English
Language : English
Default : Yes
Forced : No

Audio #2
ID : 3
Format : AC-3
Format/Info : Audio Coding 3
Mode extension : CM (complete main)
Format settings, Endianness : Big
Codec ID : A_AC3
Duration : 24mn 1s
Bit rate mode : Constant
Bit rate : 192 Kbps
Channel(s) : 2 channels
Channel positions : Front: L R
Sampling rate : 48.0 KHz
Bit depth : 16 bits
Compression mode : Lossy
Stream size : 33.0 MiB (9%)
Title : Japanese
Language : Japanese
Default : No
Forced : No

Text
ID : 4
Format : ASS
Codec ID : S_TEXT/ASS
Codec ID/Info : Advanced Sub Station Alpha
Compression mode : Lossless
Title : English
Language : English
Default : No
Forced : No

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00:00:00.066 : Chapter 01 Opening Theme