Firstly the usual disclaimer:
Do not perform this mod unless you are have a good knowledge of electronics. Remember to perform the usual antistatic procedures. Bear in mind your VIC may be a different version to the one shown here. And of course, I will not be held responsible if you damage your VIC.
The modification assumes you are using a later model VIC...with a version "N" PCB. This is the most common type. This is the one with the coloured VIC logo on the case.
The modified circuit is shown below. My VIC was different from the circuit below in that R8 shown connected to pin 3 was not present. Should you find you have insufficient contrast in your picture or its a bit blurry, short this resistor out.
The variable resistor, R10 will still function, allowing you to adjust the luminance level as before. If you have an oscilloscope, adjust this resistor to give a Y signal level of 1 volt from sync tip to white, while your monitor is connected. Do not adjust the resistor unless you have an oscilloscope, or your picture is excessivly dark or bright, in which case adjust it for a normal looking picture with your brightness and contrast controls set to their normal positions. This note also applies if you have an unmodified VIC and you want to play with this control.

Below is the unmodified circuit.

This is a view of the modified VIC from the component side, the two component changes are outlined in red. As you can see its very hard to spot the difference from an unmodified VIC.

This is a view of the PCB showing the added wire and the location of the two cuts to the PCB tracks.

Below are some samples of how the VIC display looks in S-video. These were fed into a timebase corrector to interlace the video, then the interlaced video was fed into an Amiga 4000T with a VLAB video digitiser card. The picture looks slighty better on an analogue screen as there is no aliasing effect between the VIC-sized pixels and the pixels in the VLAB digitiser. The effect is most noticeable in the 'M' in CBM.
Unfortunately I do not have any 'before' shots as I had modified the VIC several years ago, and do not want to unmodify it. You might instead compare your standard VIC display with these pics before deciding to do the modification.
Here is the standard VIC startup screen as it appears in S-Video:

And here is Frogger as it appears in S-Video:
