Like themaster1 wrote, it's possible but not recommended.
MPEG compression introduces imperfections, and those are easily magnified with each MPEG re-encode. It's more ideal to start with a lossless AVI source, filter it, and then save out as MPEG.
The exception would be if you're capturing as a high bitrate MPEG-2 -- something in the 15Mbps or higher range. And the higher, the better. This gets more towards the quality of DV and MJPEG at that point, and has less digital boogers that get amplified later. A lot of people also don't realize that SD 720x480 MPEG-2 Blu-ray specs allow for 15Mbps, so SD Blu-ray looks better than DVD-Video for that reason. (It has NOTHING to do with HD resolutions.)
And yes, you can filter with TMPGEnc Plus 2.5. In fact, you can filter an MPEG source in
VirtualDub, too. Or Avisynth. There are some tricks, however.
VirtualDub requires the MPEG-2 source plugin, and then you'll need to manually change the colorspace to YUY2. Avisynth works best with ffmpeg import, not DirectShow source.
TMPGEnc Plus is still a great encoder, though I might agree than the harder-to-use HCEnc, or more-expensive MainConcept, is better.
