This doesn't make sense to me about there New Nintendo NES console.
Q: Will it support S-Video?
A: No, because the old software won't support S-video. We could have converted the AV outputs to S-video but it would have added a lot of cost and given no benefit to the video quality.
Composite out is the tieing togather of Chroma and Luma.
So this console, like every other console can do S-Video out.
Has nothing to do with the software. S-Video will give you a better picture then Composite.
I can't see how it would have cost that much more.