Thanks everyone. I took a bit of everyone's suggestions and here is the revised script:
avisource("D:\ShanaAMV\Sequence 01.avi")
ConvertToYV12(interlaced=true)
Telecide(order=1,guide=1)
deen("a3d",4,7,8)
Tweak(cont=1.1,sat=1.3,bright=-15, hue=0.4)
Toon()
LimitedSharpenFaster(Smode=4)
and result (.png FTW):
Not perfect but much improved. Kariudo got me thinking that if I had to add that much blocking and SangNom then something during the editing process was wrong. I went back and removed the Premier deinterlacing functions and enabled blend frames then just output the interlaced clips. Telecide did a much better job of deinterlacing.