The reason why I love the 32x is because it gets rid of the jailbars with no quality tradeoff when encoding other signals....it's nothing but perfect looking s-video. I assume that a rgb to component encoder looks nice but I've never actually tried it as my best looking tv only does s-video. I recently ordered an external rgb to component encoder / converter that's known to work great with a sega genesis but the only tv I have with component inputs sucks....it's more for that fuzzy warm feeling of knowing I can get component if I ever need to. Still the 32x s-video mod costs practically nothing to do, 1 transistor, 1 resistor, some wire, a s-video connector, a little solder. The only thing that's a pain about it is tiny soldering if you're not used to that....but there's way tinier soldering out there...I guess the cost of buying a 32x is a downer to some people but on the plus side you can play 32x games if you ever feel like it
For people who don't want to drop the money to buy a 32x the revised s-video circuit for the internal cxa1145 encoder is quite a nice alternative:
The cxa1145 s-video mod isn't as good looking but it's certainly good enough if you don't feel like buying a 32x so it's a great alternative if you're looking for the best bang for your buck. It all depends on what level of quality you're looking for really.