The "real" advantage of mpeg2 is only given at Bitrates above 2000kbit/sec.
When encoding KVCDs the best choice is mpeg1 using CQ Mode cause it gives you a bit smaller filesizes and therefore more CQ!
But you have to test if your player accept this, there are player which do not display mpg1 480x576 streams for example correctly. So try and if it works choose mpeg1.
I only use mpeg2 in case of encoding 23.976 FPS streams using TmpgEnc's "Pulldown while play" function or if my source is interlaced.
Inc.