I tried an image capture in Vegas 4 and although it did work the still was only 327 x 240. The source is 740 x480 so why did it capture so small and how do I capture full size?
Right above the preview display is a menu for preview size and quality. By default this is "Good / Auto". This will shink the preview to whatever size fits in the window and your still image capture will be this size. Change the setting to "Good / Full" or "Best / Full". The display will now be the full 654x480 whether it fits in the preview window or not, and your still image will also be this size.