This modification works fairly well, but works by using the TEA2000 video encoder in a way other than how it was designed to be used. The TEA2000 can be destroyed very easily if you accidentally short circuit the video output signals. For this reason I really DO NOT recommend attempting this mod unless you know what you are doing.
Since I took these photos and wrote this webpage I have removed the modification from my own +3 and restored it to composite. Other people have taken the idea further, getting s-video output which is closer to specification levels and correct black level etc. I'm leaving this page here for posterity but I really wouldn't suggest building a mod this way so I am not providing a circuit diagram.
The theory of the modification is that by disabling the feedback from the LUMO pin (luminance out) to LUMI (luminance input) of the TEA2000, the IC will no longer mix the black and white video signal with the modulated chrominance, or "Y". The signal output on the COVO pin (composite video out) will therefore contain only the modulated chrominance, or "C"
We can therefore obtain a Y signal from LUMO and C from COVO, which when buffered appropriately give us an s-video output.
Simply cutting the resistor between LUMO and LUMI, and constructing a couple of simple transistor buffers is enough to get a clear picture from this mod as shown below, though some adjustment of brightness may be necessary on the display. A more thorough design would require proper output buffers to obtain the right S-video specification signal levels, and the addition of a potential divider to derive the correct black level voltage for the LUMI pin