The lag is because you are using a tuner card with an onboard MPEG-2 encoder. The input signal gets encoded and the PC only gets to see the MPEG-2 stream and the whole encoding process takes a while.
If it's a PCI card it should be possible to disable the encoder and use the raw, instant data. If it's USB it probably won't be possible.
The only software that has acceptable deinterlacing quality for video games is DScaler. So if you don't have a card that works with DScaler you can either
get one or for less hassle get one of
these instead.
Now what was this "LFS" thing again?
Link for Screen?