Glad it helps
To be honest I have no idea what causes the dots/netting/masking. When I used an S-Video cable with the components still missing with my PAL N64 on my CRT TV I just got a washed-out overbright picture, no dots or netting as far as I can remember.
It could be that because the Luma/Chroma signals on a PAL N64 are not at the 'correct levels' your video processor is having trouble processing the signals, so perhaps the dots/netting is being added during the processing stage due to the incorrect signal levels.
Alternatively, aswell as the missing components, it could be that your S-Video cable just isnt well shielded enough. Almost all third party Nintendo S-Video cables I have bought have been quite poorly shielded
(and poorly made to be honest) Although it really depends on how much EMI/RFI interference is nearby to cause any noticeable image degradation. The official Nintendo S-Video cable is well shielded but is really hard to find as it was only sold at retail in Japan, and in the USA it was only sold online
<EDIT> I also came across this thread from another forum:-http://www.atariage.com/forums/index.php?showtopic=123551
Sounds like a similar issue, and somebody at the bottom of the thread said they solved it with a higher quality cable so it could indeed be the cable aswell.
I dont usually recommend 'Monster cables' but in this case they may be you best option outside of the official Nintendo S-Video cable. They made a pretty good quality Gamecube S-Video cable which will work with the N64 aswell:-http://www.monstercable.com/productdisplay.asp?pin=1950
and its usually available on eBay for less than $10
...Only problem is you cant open up the connector to add the extra components to the cable, so if your going to use it with a PAL N64 you would need to add the components inside the console instead.