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This paper continues the development of a new framework for the construction of motion-compensated wavelet transforms for highly scalable video compression. The current authors recently proposed a motion adaptive wavelet transform based on motion-compensated lifting steps. This approach overcomes several limitations of existing methods. In particular, frame warping and block displacement methods cannot efficiently exploit complex motion without sacrificing invertibility. By contrast, the motion-compensated lifting transform remains invertible regardless of the motion model. The previous work was primarily in the context of a block motion model. However, block motion models inevitably yield discontinuous motion fields, which poorly represent complex motion in real video sequences. In this paper we consider the benefits of a continuous motion field, by incorporating a deformable mesh motion model into the existing framework. Experimental results show that this leads to improved compression performance. In addition, we show that the invertibility of continuous motion fields allows greater potential for compactly representing the motion information.