Thanks for all the replies though I'm still at a loss as to what exactly is causing the problem
LOWRIDER:
I tried the Autom. - CVBS/YC setting on the Loewe AV3 but it definately did not detect any kind of YUV signal. It was displaying a CVBS composite video signal obviously from the Sync phono connection. The picture quality drop was immediatly evident so it was easy to tell that the TV was only outputting Composite using the Autom. setting. I double checked this by explicitly selecting the CVBS setting and the picture was exactly the same as on Autom. If I were you, I would put a DVD on and switch between Autom and the two YUV options as I suspect your Chord RGB Scart is displaying a CVBS Composite signal via the Scart sync pins and not YUV. I may be wrong though this was definately the case on my Aconda.
ReTrO:
I realise I don't actually need to use the Sync on CVBS setting as Sync is fine being carried in the Y. I can't notice any difference in picture quality between the two methods but was just wondering why the Sync on CVBS method was producing the aforementioned problems. I assume it should work.
Akash:
Thanks again for you help. AV3 is set to auto in terms of Pal, NTSC etc. and the DVD player auto outputs PAL or pure NTSC (it does not allow for Pal 60). I have tried matching the TV to NTSC when playing an NTSC DVD but it makes no difference. As you say, the problem sounds like it is to do with the DVD players Composite Output. I've discovered the picture also cuts out on PAL DVD's using the Sync on CVBS method.
So there you have it. Still at a loss but I'm off the opinion the DVD player is to blame.
Thanks again.