Yup, I'm aware that transcoding from one lossy format to another, such as mpg2 to mpg4, is not ideal. However, it's really no different than ripping a DVD to DivX, and results can still be very good. I am no expert, but it seems to me that if you could use the same keyframes when transcoding, wouldn't that maximize quality? I dunno...
As far as editing mpg2, all I'm interested in is to be able to re-encode a single frame into a keyframe so as to make more accurate edits. Since the frame in question is either at the end of a fade-out or the beginning of a fade-in, the frame will be all black and therefore quality is of minor importance.
I Hope what I'm asking makes sense.