So when you switch AV1 OUT on the back of the VCR from COMP to Y/C you lose the image completely? Also, you're sure the SCART cable itself supports Y/C?
An adapter from S-Video to composite will not produce a better picture than just connecting composite SCART from VCR to the TV.
If you're not able to get Y/C over SCART, your best option is to convert the S-Video output to HDMI somehow. The cheap Chinese converters you see on Amazon
do a poor job as far as colors, scaling, and deinterlacing. Usually they force 720p/1080i/1080p output, offering no option for native output. This means they always have to deinterlace, which IMO is the most complex part of the conversion and the easiest to get wrong (besides TBC, I suppose).
Buying an older professional scaler may be an option, if you can score one used for cheap. But I think the best bet would be a DVD recorder with S-Video input and HDMI output. In particular, an older Panasonic model that offers multiple output resolutions for you to test which works best: 576i, 576p, 720p, 1080i.
Or if you don't own any A/V receiver & speaker setup, consider investing in one and then buy an AVR that can do this conversion at every resolution. Though S-Video inputs on AVRs are getting harder to find, as well.