What about the graphic capabilities of the PCE and Sega CD? I doubt the color palette or graphic resolution on either system would be up to the task. Any sort of clever processing to get around this by approximating the color palette/downscanning the resolution on either system would probably require processing power that neither system has as well.
The color of the PCE is adequate, the color of the MD is never adequate.
The output resolution of both systems is plenty, but only if they could render video across their entire resolution at full speed without running out of buffer which I assume they probably can't, otherwise the Yuna video would have been full screen.
The other problem is that since VCD is different color/resolution-wise than a PCE there will (I assume) have to be a little bit of conversation going on, which is going to hit the CPU pretty hard.
So...HuVideo yes, actual MPEG1 VCD, no.
I would love to buy Dragon's Lair for the 100th time as a PCE game. I bought the DSi one (and DL2, and Space Ace) and its really good. One of the very few home conversions that has as little scene lag as the LD one.