John,
I've heard very mixed things about the video quality from people who I trust. Some say its great, others say the output from the M SDI card is not really all that great.
My understanding on the Faroudja method is, yes, it cuts out some of the chroma because of a bottleneck in their product that requires the 480i signal to be converted into y/c. From there it does their chroma enhancement by mapping the chroma channel to information in the luminance channel. You'll have to pardon me if I have this wrong, its been a little while. In any event, I can tell you that analog out of the 800->Faroudja NRS->DVI->DLP= WOWOWOWOWOW!!!! picture. Extremely vibrant colors. I am so satisfied with the results that I just have lost the desire to upgrade and upgrade. I think I am waiting for the eventual HD-DVD- whenever that happens!
Best regards,
Jerry