You're free to increase resolution of both playfield and PMGs if and when you choose.
e.g. you could if you wanted have a Score/Status area done in Graphics 2 in it's normal resolution, have a play area in Multicolour character mode 4 using 2 character sets to double the vertical resolution.
You could have the Player's character in doubled vertical resolution too by storing to 2 PMG areas and toggling PMBASE each field.
If you don't utilise the added resolution, of course, you will notice a slight jittering, especially where there's great contrast between adjacent vertical pixels.
Using interlace is a little bit like the rules (horizontally) when using the hires 320 pixel modes, except this time in the vertical orientation ... lone pixels or lines don't always work the way you want - you're often better off doing lines 2 pixels thick.