I did several encodes with one of my preferred reference shots, "The Fifth Element" (SuperBit) on a close-up with a fair amount of detail. My comments at the bottom.
DVD Source
Cav/Dynaflash Setting - 62%
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Modified Setting - 62%
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Modified Setting - 65%
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For this shot I look at the transition from dark to light (left to right), the strands of hair and shadows for clarity/aliasing, and the reflection in her eye and sweat on the cheek for raw detail. Using the first encode as my baseline, my modified 62% encode with 4 reference frames and 6 bframes was 2% smaller. The 65% encode was 22% larger. Was it 22% better? Well, I think no.
But the real issue I have compared to the DVD source is the quality. There is a noticeable drop in detail and the colors are washed by some sort of brightness increase. The detail drop is most readily seen in her eye where the reflection changes shape. The brightness shift I have no explanation. Any ideas?
Just for fun I did an encode with the "AppleTV" preset and no other changes with the same washed out effect.