well it can be done it would require heavily modifying the library. If this was to be done the best solution would be driving the video directly from the ram instead of reading it back in and then outputting it. Basically the arduino would output the address of a pixel in the external memory then the retrieved data word would be fed directly into the dac.
This far beyond my vision for TVout. What I just described has been done before though and can be found here: http://www.lucidscience.com/pro-vga%20video%20generator-1.aspx although its vga not composite.