I use procoder express with great results. Its quick accurate and yeilds great results. I primarily use it to transcode from AVI to web ready WMV. For DVD preparation I use DVD-A and let it code from AVI to mpeg so I can not comment in this regard.
I use ProCoder 2.0. It handles simultaneous rendering to multiple formats more conveniently than Vegas.
It is fast and sometimes a little bit better quality than the MainConcept encoder, but some people here have reported that sometimes the MC can be better too.
A hardware encoder is a box with a CPU running a software encoder. No other magic, no special chips. Just an expensive alternative that is more convenient for some.