Are you using the right capture programme in Vegas? There are 2. 1 for SD, and 1 for HD. Go to Options/Prefs/Video tab, and double check that 'Use external capture application' isn't ticked. That's for SD only.

I went to options to see see if 'Use external capture application' was ticked and it wasn't.
I then opened vidcap and tried to capture and it acted as normal and I'm capturing that tape as I write this.
I then read the thread earthriser suggested and after the capture I will check to see what my project properties is set to but I did have it set to HDV "use as default" or whatever it is.
That said it seems strange that things would change since I had just captured a tape prior to the issue in the same project.
I'll report back after the capture though.
Thanks very much guys,
Randy

I've been battling a capture issue with Canon cameras for a while. Best work-around is to start the tape playing while connected to the PC and then boot up. You may still have to hit "reconnect" after you rewind the tape, but it captures perfectly for me after that. I keep waiting for either Sony or Microsoft to do something that will fix this problem. Not sure which it is, only happens to me on Win 7.

Well I went to project properties after the successful capture and sure enough it was on an SD template.
I then set it to HD and ticked the "start all projects with these settings".
I closed and opened a new project and although it showed the HD template under properties the "start all new projects was no longer checked"...so who knows what'll happen next time.

Best work-around is to start the tape playing while connected to the PC and then boot up. You may still have to hit "reconnect" after you rewind the tape...

The thing is at the time of this incident it showed the name of the camera as the device and everything worked except for the actual capture and preview.
Think I'll just chalk it up to weirdness and see if it happens again.
Thanks guys,
Randy