can’t say i have any “Interlaced” content (i know from testing on the WDTV 1080i@50hz works ok for PAL interlaced content … but yours in NTSC, so i don’t know how that will look)
Have you considered trying Handbrakes “Deinterlace” option for H.264 ? Video Filters > Deinterlace
For an explanation of the Fast, Slow, Slower settings click this link