There is a lot of stuff going on in the Xbox's video encoder, the flicker filtering is not alone in reducing picture sharpness.
The first Xboxes used an off-the-shelf video encoder from Conexant, the CX25871, designed for use in the TV output of PC graphics cards. Later, Microsoft replaced it with a compatible but cheaper encoder developed by Focus Enhancements on Microsoft's request, the FS454. Even later they changed to a custom branded one called Xcalibur, whose origin is unknown to the public. Some suggest that the Xcalibur also replaced the venerable Wolfson audio DAC used before. It's as mysterious as the name suggests.
The Conexant and Focus Enhancements video encoders suffer from a fatal flaw when connected through RGB SCART. Because of the additional filtering needed (not the least the flicker filter), the signal is mercilessly reformatted in preparation, which alone causes a loss of sharpness. And that's not all. What follows is a somewhat technical description of the atrocities commited to the signal.
>> Tech babble
First the input is converted from RGB to the YCrCb color space, and the color components Cr and Cb are subsampled to half in the horizontal direction, producing a 4:2:2 signal. From there it is scaled to either 720x480 or 720x576 pixels regardless of the original resolution, with flicker filtering applied in the scaling process itself. The color components are scaled to a 4:2:2 output, so even after scaling they're half the horizontal resolution of luma. There goes a lot of sharpness already.
And it gets worse. When using RGB SCART, the sync is taken from the composite signal, so the Xbox produces a composite signal alongside RGB. To stay within the bandwidth restrictions required for composite video, the color components must be heavily low-pass filtered, resulting in < 1.5 MHz bandwidth at -3dB. The problem with the Conexant and Focus Enhancements encoders is that they cannot tap the signal before this filtering occurs. As a result, the RGB output is lowered to composite bandwidth.
<< Tech babble
So in a nutshell, the RGB SCART output of Xboxes with Conexant or Focus Enhancement encoders has color bandwidth as low as the composite output. That sounds outrageous, but alas, it's true.
DVD Video playback bypasses the scaling and flicker filter, but the color bandwidth is still reduced. So much for using those Xboxes as DVD players.
Newer Xboxes that have the Xcalibur encoder look a whole lot better via RGB SCART than the old ones. Even the Xcalibur, like its abysmal predecessors, appears to scale the image horizontally to 720 pixels, producing a softer image than that of competing consoles. However, it does not appear to subsample the color, and it certainly does not reduce the RGB bandwidth to the same as composite video. The increase in color clarity is shocking. On top of that, the flicker filtering is more tempered and not too obtrusive. But, of course it's still there.
Whether or not it's possible to make forced entry into the core of the system and changing the flicker filtering for playing games, I don't know. Those modifying their Xboxes for running Linux play around with those settings, but that of course doesn't help when running games.
I guess an import machine with a HD pack is the only real way to get a truly good quality image out of the Xbox.
If you have an old Xbox (made before spring 2004), you may gain a bit higher picture quality via RGB SCART simply by upgrading to a new Xbox. That will also get you an Xbox that does not require a 2lbs dongle on its power cord to keep it from exploding...
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