nallur --
I think you're right about not capturing at such reduced resolution and high compression, if you have the other hardware to avoid it.
Take a look at Pinnacle's Studio DC10+ . I ended up buying one, since I happened to find a real good deal on one, and it was on my list. I didn't want to go too high end to begin with, and I also want analog conversion, not just digital video imput (firewire). But it was a relatively blind buy -- which is pretty unusual for me. I mean I did some research, or tried to, but I found it hard to find much on the less expensive stuff.
There is a lot of info floating around on the firewire digital video (digicams) cards that the manufacturers want to sell you now, or combined digial and analog input cards. But my somewhat legacy digicam is Hi8 analog, so I didn't/don't need that. Besides, I want TV capture too, I think. As for DVD capture, well you can capture its SVHS analog stream out of your TV/VCR, or you can rip directly from the DVD using something or other. I think the Tom's article I refer to below mentions that.
Trouble is, I haven't yet built the computer my Pinnacle Studio DC10+ supposed to go into :frown:, so I can't tell you how well it actually works.
You also need fast hard drives, not just big ones, to take uncompressed, or lightly compressed, video streams in on the fly. It used to be that only SCSI worked really well on that. But I think no longer. Certainly I think that IDE Raid ought to do it. See my rig. I think I'll be OK.

I think, but don't know for sure, that one of the faster ATA100 drives solo ought to be OK. Well, I'm sure it would be ok if you chose higher compression ratios. I think maybe its ok at the low ones, although raid0 does really help for just this sort of thing.
The reason I suspect the DC10+ didn't get more attention is that until faster drives, drive interfaces, and ide raid came along, most users that were going to economize on their video capture card were also not going to have SCSI and have systems that ended up with jerky input streams. I'm guessing here, but it would make sense of the info and lack of info I've seen.
Because otherwise the Studio DC10+ seems pretty nifty on paper to me. Check this
table out, and also rummage around their site. They are trying to sell you one of their real expensive getups, but they also have stuff like the DC10+. It looked like the best low end solution to me, provided your computer has the horsepower.
This article at that same high end prosumer video computer equipement site, is among the best I've seen in describing the basics of what goes on with video editing. However, also go over to Tom's Hardware, and read his article on MPEG 4. It's the hot coming thing for compressing and storing MPEG 2 = DVD level quality, for transfer over the web, on CD's, whatever.
Seems to me one could capture with the DC10+ in its MJPEG codec, video edit in that, and then convert to MPEG 4 using the free programs Tom's talks about, for playback on other computers, the net. Or just ouput the stream in analog, without converting from the MJPEG codec, onto VHS or preferably SVHS videotape. And maybe burn a CD for edited digital codec in case you wanted to do more editing later on, to combine with other footage, etc.
All of these thoughts you understand are from someone who has never done one bit of video editing.

Just read up on what I needed equipment wise to start to get into it.