Here are some instructions I saved from a previous thread. I have tested these personally and liked the results.
"Motion processing" -> "Field only"
"Compare color channels" -> On
"Use cubic for interpolation" -> On
"Motion map denoising" -> On
"Motion threshold" -> 0-15 (I like a setting of between 0-5)
"Scene change threshold" -> 100
All other boxes should be unchecked.
Go into Project Properties and change "field order" from upper to none (progressive scan.) Also change "deinterlace method" from blend or interpolate to none.
I have had good results from these settings. I forget who originally posted them a few years ago.
I really don't like this deinterlacer. In numerous tests, I always like a simple Vegas blend fields or interpolate better.
One thing you really have to watch out for is that you really can't resize or zoom into the footage at all with this deinterlacer. You get really bad resized interlace comb squiggle if you do.
The Smart de-interlacing is adaptive within the frame. If there's an area with little to no motion it'll blend the fields in that part of the frame. So for that part of the frame you get as much resolution as there is.
Areas of high motion it switches to interpolation to avoid jaggies but with a loss of resolution. That's not normally an issue as we can't see fast moving object that clearly anyway.
The de-interlacing provided in Vegas is all one way or the other. Blend the two fields or interpolate one field.
I haven't tried using Mike's filter during downscaling however you would need to be careful to ensure that it's working BEFORE the downscaling is done, otherwise you would get some bad results. That little yellow triangle might hold the answer.