After seeing the kit for the Commodore I bought the same module and used in a DIY bedside clock radio I was building. I found it worked well if you have a decent antenna, length being critical. Being inside doesn't help either.
It's not a dumb question and it IS possible. However, it's not easy and would need a fairly complex encoder chip.
In fact, it's actually already done for you. there are quite a lot of RGB to Composite solutions around. One being the Amiga A520 modulator. That takes RGBHV and turns it into composite. The big drawback for most of these you have to convert the digital RGBI into analogue RGB first which makes it even more of a complex board. I am actually considering making a dual board like this that would sit in place of the modulator and replace the RF out with S-Video from the VDC. All depends if I can fit it all in that small space.
I think they are just filter/smoothing caps to prevent ripple on the 5v supply. Each chip has one. Unless you short the exposed part (or its shorted already) it shouldn't hurt one bit. A couple of mine are missing a tiny bit of the edge and it all works fine.