This is about pure as it gets. Every time you 'step down' this signal, you lose some quality, not only in the conversion process, but in the subsequent cabling as well. Also, your TV has three 'light guns' inside generating the picture you see, and if you've dropped from RGB to something inferior, and your TV has to seperate this signal into RGB again. R G B - as mentioned, is the best. One wire for each colour, usually with it's own RF sheilding to reduce any interference and any subsequent quality degredation.
Nothing is better.
The original image is preserved as completely as possible, all the way from the source to the display. The display device doesn't have to do any work seperating any of the combined or composite signals into the red, green and blue channels for final display. Component Video is a bit of a misnomer - RGB is technically also component video, or video whose components are transmitted seperately. Usually, when someone refers to Component Video however they're referring to Colour-Difference video. The luminance is the signal s brightness information only, and includes no colour data.