This is incorrect. Lossless H.264 encoding is lossless, full quality JPEG is not. The chroma subsampling you are referring to is caused by the colorspace conversion to YV12, which is not a part of the H.264 compression, but done prior to encoding. There is no way around it except use a different colorspace.
What format is the RAW in? Meaning what video codec and what audio codec? MeGUI is viable, except the things in it is a bit outdated. It really should be AviSynth + x264, IMO. AviSynth allows you to join clips together, so you really didn't need to combine the files into 1 huge file. The audio desync, I'm assuming it isn't in the RAW file?
PS: If you go on IRC, I can help you better there.
The saturation tweaking compensates for the YV12 conversion darkening and makes the red really look red.
So lately I've been working this color loss problem again, and after doing more research, the reason why the conversion seems to darken the colors is because of chroma being interpolated while converting. Now there is a way to stop the interpolation, and that is using ConvertBackToYUY2(), but unfortunately this only seems to work only after ConvertToRGB(). I've created a thread on Doom9 (http://forum.doom9.org/showthread.php?t=152091) on this issue.
Update:
Seems ConvertBackToYUY2() is working correctly and the information provided on the Wiki page is wrong. I now recommend the best way to keep colors is use AviSynth Version 2.60+ and the following script:
(although neither of the above PSX runs actually uses a higher resolution, so I must question the utility of ratio-breaking there other than that nobody else provided an encode and that the encoder responsible did not see if lower settings would be acceptable)
I don't believe this is true, since the current posted encode still has visible artifacts, though minor. Lowering the bitrate would just increase the artifacts.
I wonder why I'm getting tons of messages like this from mplayer when I try to watch the video:
[mov,mp4,m4a,3gp,3g2,mj2 @ 0x88ff200]Invalid timestamps stream=0, pts=212517001, dts=212518673, size=22
Maybe has to do with the dropped frames. Is your mplayer up-to-date? Another thing it could be, it may be a bug that was there while making the MP4. I'm not sure this encode was affected since I forgot when I found the bug, but I fixed the bug and it should be gone in newer encodes by me.
Edit: On second thought, that bug should only cause the error to show up every once in a while, not all the time like you seem to suggest. Maybe it's something else.