Funny you mention that, boxes to display composite video in VGA are fairly common, and it is my understanding the C=Key http://www.go4retro.com/products/ckey/ should plug into the VIC-20's parallel keyboard connector and allow use of a PS/2 keyboard with it. Then there's this project to use a PS/2 mouse as either a 1531 or 1530 mouse: http://sensi.org/~svo/[m]ouse/

It appears the forum really doesn't like brackets in URLs, so that one isn't quite clickable, sorry.

So, it's not outside the realm of possibility to use a VIC-20 with this.