It's not a strange question at all. In fact, it's quite intelligent to consider this.
Yes, you usually lose picture quality by switching to a composite signal ("RCA") instead of leaving luma/chroma separated. Remember that s-video stands for "separated video", and not "super video" or "SVHS video" like some people mistakenly believe. Leaving the signals separated prevents crosstalk noise, such as dot crawl, or increased chroma noise and color bleeding. Cramming all the video into a single signal is inferior. That's why coax is lousy (all audio + video) compared to RCA/composite (RCA red/white for audio + composite yellow for video), and again why both are inferior to s-video. S-video is further inferior to component ("RGB", or more accurately: luma, chroma-R and chroma-B), because the chroma signals are separated in component.
Try to use the best path as often as possible.
Sometimes composite in a workflow is unavoidable, due to conditions on the tape, or with other hardware in the workflows. In those cases, make the best of it. Using intermediate VCRs can also help, using them as 3D Y/C comb filters, to denoise/purify (decrapify) the composite signal.
As with a lot of things video, there's no direct answer: "Yes, do this." or "No, do that."
It really just depends on the situation.
