As far as I understand the Chameleon somehow duplicates the C64's VIC output onto a 60hz vga display. See http://www.syntiac.com/chameleon.html
I would assume that would mean stuttering on a PAL machine due to the frame-rate conversion unless they're using some sort of clever buffering technique, but of course you'd be free to use the standard 15khz video output from the 64 at the same time
If you're just looking to play games, the 1541 ultimate might be a better bet, it's half the price and doesn't have the VGA output and turbo functions, but no games need that anyway. By the way, you know the C64 outputs S-Video right? That should be significantly better than composite.