I don’t reencode anything, I keep the raw bdmv rip and remuxed mkv for jellyfin. Even if the difference is imperceptible, as long as I have the storage space there’s no reason to spend time fiddling with conversion when it can only make things look worse.
It doesn’t sound like a purely cut down version of the game. I get the sense this will have more substantial environment/gameplay changes made than the existing mode, which mostly wraps vr controls over the original game.