I have a Dazzle unit and really hate the thing. I get massive lost frames. I've tried changing software (Virtual Dub, etc), adding memory, different video cards, drivers, etc. and still drop frames. After reading tutorials and FAQ's I can only assume the problem lies with the Dazzle gadget. It only seems to capture smooth video in RAW mode but then the video is loaded with garbage (which is what I think is causing dropped frames during compression/processing).
At any rate, save your money and buy something else.