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The C64 is very noisy so maybe this LumaFix64 Mod doesn’t do a good job cleaning the signal?
Lumafix is really for fixing the vertical jailbar issue caused by clock signal interference but the C64s output is, as you suspect, just generally noisy and badly designed, we’ve even a prototype new encoder for C64 here and it can’t fix the issues entirely.
On my 64s I’m seeing really bad horizontal jailbars with the newer RetroTINK f/w, even on the proto new encoder machine. We’re close to a fix though the latest firmware I tested (with an additional mode for S-Video (NOISY)) cures the issue for me.