<< There is also a few AIW Radeons that supposedly support MPEG-2 at slightly less $$$. $279.99 at Fry's >>
You should be able to beat that price on the AIW Radeon by quite a bit.
With my AIW Radeon and Duron 650, I can capture with no dropped frames:
Mpeg-1 any settings
Mpeg-2 up to 720x480 I frames only all other settings maxed
Mpeg-2 up to 480x480 IPB frames and all settings maxed
Raw AVI up to 720x480 NTSC
IMHO, VHS is very close to VCD (mpeg-1) quality so I get good results capturing Raw AVI at 320x240 and using Nero's internal mpeg-1 compressor and burning a VCD. If you are pressed for HD space, almost as good results capturing mpeg-1 and burning the VCD in Nero(much faster/smaller file sizes)