If they were using S-video in 1990, they were either converting to s-video from composite which would negate the benefit of s-video, or they were using a playchoice-10 arcade unit and converting the RGB to s-video, in which case the pixels would be sharper but the colors were wrong because the arcade ppu had a different color palette to accommodate direct rgbs arcade monitors. I sort of doubt they were using a Playchoice unit because back then pretty much all projectors could take an RGBS arcade signal directly (I am doing this today but with ordinary CRT) and gotten even less loss so, they would have used that. But, it was common back then to convert composite to s-video not to improve the picture quality, but to reduce the picture quality loss from long cabling so I'd guess that is what they were doing. I don't doubt you saw a good picture but it probably had more to do with the projector. There were projectors back then that could do a thousand vertical lines of resolution.
Subpixel rendering was a necessity to make recognizable faces on the tiny sprites, this is common knowledge in the pixel art community. This pretty much relied on the blurring effect of the CRT. Arcade monitors are sharper, but it's still a very low-res CRT.
Now that I have expressed the limits of my video knowledge from that era, some grey AV nerd with even more knowledge please come out and put me in my place.
Subpixel rendering was a necessity to make recognizable faces on the tiny sprites, this is common knowledge in the pixel art community. This pretty much relied on the blurring effect of the CRT. Arcade monitors are sharper, but it's still a very low-res CRT.
Now that I have expressed the limits of my video knowledge from that era, some grey AV nerd with even more knowledge please come out and put me in my place.