That's exactly the technique I used, I just removed the RF modulator and in its place soldered on a PCB mount S-video jack. I also put in some audio jacks, one on each side of the expansion port. I also used a 220 ohm resistor since I originally wanted to try a 200 ohm like Keith but only had 220s laying around. The colors are a tad bit washed out, but I think that might be because I'm more used to RGB these days.
But overall I'm pretty pleased with the result and now I have a PCE I can tote around to meetups and stuff with my friends!