Yes, a high quality DVD encode is that demanding on CPU load. At least you know that old box is running stable as a rock
When you're recording off TV, then encoding to full DVD quality is rather pointless anyway. Dial the quality down to half that, which is plenty enough for the task. That'll cut encoding times dramatically - as your venture into extremely-low-quality VCD format has demonstrated.
Letting the TV card make a precompressed recording saves the CPU from doing that, but also binds you to compression algorithm and quality settings this particular hardware has builtin. Nonetheless, this too might be perfectly good enough for recordings off TV or VCR.