Sorry about the delay in getting back on this....
The Act-labs TV Gun's only have a S-video connection on them (I've been told) and as such there is NO WAY to have component quality video while playing Light gun games. As soon as you convert the signal from component to S-video, you lose quality, so buying an adapter to convert from s-video to component would not improve quality at all. Once the quality is gone, its gone.
The best solution (I think) is as you mentioned, using S-video only for light gun games. Not switching the TV by remote could be tricky - you could maybe install a button on your CP or something, and then hack that into the remote (which can be stripped and installed hidden, right in front of the TV) - some people have done this to power up the TV from a button - you would have to investigate.
The other option I mentioned was that Act-labs make a PC Gun (now discontinued I believe - ebay?). VGA cables essentially carry component signals - R,G,B and Syncs (Horizontal and Vertical). It *may* be possible to use the PC/VGA gun with a component TV.
How do you connect from your PC to your TV? a VGA cable with BNC connectors?
What resolution are you displaying? If its standard windows res (eg 800x600 or 1024x768 or similar) then I would guess that the TV is internally altering the signal which may stop the VGA guns working.
Some more info on you setup (software/gfx card/connections/TV) would be helpful...