(1) This is what a clean encode from an ATI AIW card would look like,
as well as any number of better DVD recorders (Pioneer, JVC, etc):
(2) This is what a Panasonic would look like with a clean source. It has a "splotchy" effect to it, and the splotches tend to "wiggle" a bit on screen. Notice how gradient patterns are virtually destroyed:
(3)And finally, this is what happens on VHS source. Notice the blocks, the noise, and the compounding of "splotchy" effect. The image quality is turned into video kibble.
CONCLUSION: There is no special reasoning behind these errors. It's merely incompetent engineers at Panasonic developing inferior in-house video chips. Their encoders matrices are inadequate, and the bitrate is too shallow (especially on the newer line of "ES" machines).