I'm working with a 352x240 29.970 CBR vcd of an old animated movie that was apparently created from vhs capture. It has fair quality and cd's play ok. I am trying to put on dvd with DVDLab with some other old animated movies.

I have used vcdgear to change dat files (2 cd's) to mpg files. Having to use VDub-MP3 as load fails with VDUB-MPEG2 will not load. Also, DVD2AVI will not load mpg files.

All attempts to load into various systems fail upon load or save. It will load into TMPGEnc, but preview shows massive large pixels.

How is best way to process this? I've tried about everything I know and there are apparently bad frames somewhere, although Vub-MPEG fails to note any.

Are you sure your file are MPEG2 ? It seems to me they are MPEG1.
Did you try to use Vdub and not other variants ?

if the VCD plays fine, it seems to me that VCDgear screwed up. Is there no other way of remuxing dat into mpg (TMPGEnc?)?

This works. You have to demux then remux (or use the cut/merge tool).