Widescreen is a reason. My experience is (and you pointed out some of the reasons why) that S-video is much better visually than composite video stretched with the aspect ratio setting. Beyond that, another reason to use analog connections is that many people are hearing impaired and many...
I don't think you're going to get a better answer. I would interpret my answer as advocating towards sticking with S-video if there is such an option, without saying definitely that one is objectively "better" than the other, because people get religious about definitive proof about saying...
Personally, I want S-video. I have some older DVD players that will put out widescreen properly through S-video, but composite video obviously doesn't support that.