The current DVD encoding with SF/MC in VV has been able to hold its own and even beat (on a subjective level) the hardware encoders that I have put it up against. The version before this was holding its own down to 6mb but then losing. The current set up has held its own down to 4mb.
What you will get with a hardware encoder is an improvement in speed depending on the speed of you CPU and bus etc. With my < $1500 PC I get a 2 to 1 encode time. With the hardware encoders that cost much more than my PC alone you can get 1 to 1 or sometimes faster. Right now I find the VV solution the best answer for me. If I were encoding 8 hours of content a day I might look at hardware.