Just a quick update on this, in case anybody else is interested:
The interlacing issue would mostly go away after my cab had been on for about 6 hours! I changed the controller IC on the chassis and now the interlacing jiggle goes after about 10 minutes. I'm still not sure interlaced modes look quite as good as they should but it's now easily good enough for me to call this issue fixed. I suspect the IC socket on my chassis could do with being replaced, so have this on the to-do list.
I should also point out that to get rid of the jiggle, I had to increase the V Total in ArcadeOSD for all interlaced modes. The sweet spot seems to be about 560, for most modes. This means I have to disable modeline generation for playing interlaced games, but I can live with that. Just glad to be able to play without going cross-eyed with all the jiggling!

Cheers