I edited the schematic to add input termination resistors.
It will work with PAL or NTSC. To test for AC-coupled operation, you can add a 100uF cap in series with the luminance output on the s-video connector and connect that to the composite input of your TV. Don't forget to add a ground connection between the two connectors also. If you get a monochrome signal that looks good, then your TV is handling AC-coupled video. Watch for luminance-level (brightness) drift after scene changes where the brightness has made a sudden change. If this happens, you probably need to be direct (DC) coupled.
I have worked with video for many years, but as you can see, I'm not very familiar with TV input circuitry. My best guess is that, in order to handle all possible video sources, TVs are AC-coupled on the input, with a subsequent DC restore circuit (keyed off horizontal sync) to get back to DC. I think there were, and still may be, some cheap sets that are AC coupled all the way through.