Yep, that is a crappy conversion to HD @ 25 fps. It looks like it came from a VHS source.
They didn't bother to IVTC the source before converting to 25 fps, hence the 2:3 pulldown frames showing up with combing. And yes, their standards converter melded frames. All of which you will not be able to get rid of.
I'd be interested in seeing the first TOC file of the DVD. Since DVD files are only 1 GB in size, that would be just fine.
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