Yeah, that is exactly right.
If you want to use S-Video to turn your TV into a monitor for applications you will be disappointed. However, watching video has been fine for me with my Radeon 9800 running Windows XP Media Center Edition 2005 on my HTPC.
If you really want to get it right look to buy a new TV with VGA input listed at a high resolution and you'll be happy.
So the simple answer is: you'll be happy with your S-Video out for many things like video and some games but applications will render almost unreadable text.
Hope this helps,
Joker