There's a recent thread at videohelp that looks interesting:
http://forum.videohelp.com/threads/3...ideo-animation
It discusses the use of the Avisynth filters santiag() and AAA() for removing jaggy aliasing, due to drop-frame deinterlacing.
That won't be an automatic fix for crappy old VCDs, but it will add another piece to the puzzle.
I've not worked on VCDs in years, mostly because the restore methods weren't that great. This improves upon one of my methods. (Part of which is also described in that thread.)
Neither of these address de-block or denoise (or chroma correction). That has to come in latter filters.
Who here still works with old VCD/degraded sources for creating DVD sets of rare TV shows or cartoons?