Yeah most VCRs that are not ancient work in a somewhat similar manner. The luminance output is split and fed into a delay line (CCD on most modern VCRs) that delays it by 1 line, if the tape video signal drops below some set level the VCR switches to outputting the delayed line instead of the current video output. The same delay line is usually used for luma noise reduction as well. Chroma is usually just muted unless the VCR has fancy digital dropout compensation (e.g in combination with the digital TBC/DNR circuit) as it requires a bit more sofisticated circuitry to do that correctly.
I have also noticed what you noted that most non-JVC VCRs seem to output noise after some number of lines, while the JVCs keep outputting a delayed signal forever. One issue I have noted though is that the DOC lines especially with dropouts several lines long tend to be more offset than in many other VCRs instead, especially on my HR-S8600, HR-J681 and particularly the Philips VR1100. The older S8500, J658 and newer HR-XV20, and JVC Camcorder seems less affected. Especially noticeable with the TBC on the 8600 and VR1100 TBC enabled as the TBC can struggle a bit with recovering from the offset lines. My JVC GR-SX22E camcorder seems to have a completely different video decoding circuit than the VCRs, it doesn't suffer from the issue with offset lines, but goes into noise after some number of lines instead.
This document for the JVC HR-S9500 and other models from the same lineup mentions drop-out compensation as part of the TBC/Digital board. To what extend it works in practice I'm not sure, and later JVCs don't have a DOP connection to the 3D digital board listed in the service manual.
The Panasonics I got here seem a bit hit and miss, they lines they compensate work well, but they seem to be a bit limited in how many lines before they go into noise. I don't have a well-working newer one than the 1992 NV-HS1000 to test though. There are some panasonic SVHS VCRs that have a digital decoding process like the US AG1980P and PAL NV-HS850 and 950 and probably some broadcast models, I have no experience with any of those.
The more modern Sanyo-IC based non-SVHS VCRs I've got (Samsung, LG, Sony) seems to do slightly more lines than the panasonics before noise, the DOC lines on these end up usually being very straight.
This document has some interesting comparisons, the huge JVC Broadcast decks seem to have some very advanced dropout compensation with color.
For 8mm, the TBC/DNR equipped sony camcorders have very good DOC, including chroma, seemingly able to repeat perfect lines endlessly. I think they use a digital decoding process. For some reason the CCD-TRV218 ouputs noise after a bit instead unlike the other ones I got, it was a lower end model at the time so maybe they skimped a bit on memory or something.
