I do a lot of transferring of older VHS tapes to .mpg and .avi video formats. I use a JVC HR-S5911U S-Video VCR, an ATI TV Wonder video capture card, SoundBlaster Live! audio capture card, and some combination of Dr DivX, Windows XP MovieMaker, and TMPGEnc.
An S-Video VCR can be used as a regular VCR, but it also has incoming and outgoing connections that can either input the analog VHS video to the computer, or record a video that's on your computer to a VHS tape. The video and audio capture cards are hardware that are installed into your computer.
I bought the S-Video VCR in 2003 for about $240. I can't remember the name of the store, but it was about three doors south of the Zanzibar on Yonge St. I had no luck looking for such a device in other electronic stores. Future Shop tried to sell me a digital VCR for about $1,300, and other stores I visited didn't have any machines that would do the job, but the manager in the Yonge St. store knew exactly what I wanted, and threw in a few connecting cables for free.
The video and audio capture cards were about $100 each.
I've found this VCR model to be high quality and easy to use. I've also found that if you ask for a specific brand and model on an electronics store, you'll usually be quoted a lower price than if you just ask for a device that performs a specific function.
You connect the S-Video VCR to the sound and video capture cards, and play the VHS video using the TV setting for the video capture card. It's like recording from television; you decide when to start or stop recording, when to pause, rewind, fast forward, etc. The recorded video from the VCR will be in .mpg/.vob format, which you can burn to DVD.
If you want to compress the video to a smaller size, (which I do, for file sharing), you can convert it directly to divx with Dr Divx, or another divx encoder. If I need to edit out bits of commercials, boost audio, etc., I encode the .mpg/.vob file to high quality .wmv with the XP MovieMaker, then convert to .mpg, (and do the editing), with TMPGEnc, (TMPGEnc won't convert .mpg/.vob directly. It must be in a different video format first).
The initial re-encoding could also be done with Dr Divx, or another Divx encoder. If you have a divx encoder that allows for audio boosting and frame-by-frame editing, use that instead of the XP MovieMaker, which is very slow.
If converting to compressed video types, you may need to change the file extensions to .mpeg for the temporary video files, (i.e.: the 'raw' capture and unedited video files that will be deleted, once you have completed the compressed video).
If you're recording from a store-bought VHS tape, with good sound, and no frames to edit out, convert the .mpg/.vob file directly to divX.
Many new DVD players, other than the $40 models, should have S-Video out, and you can connect to the capture cards in the same way as for an S-Video VCR. The ATI TV Wonder card has a colour diagram that shows how to make all of the connections.
