If you are not going to fiddle with the video, then capturing as MPEG2 is good because no recoding is needed to put onto DVD. If you intend to do sharpening, de-noising, etc. then AVI is a good choice. Remember, you can't make a silk purse out of a sow's ear.

If you have access to an S-VHS VCR along with a device such as the ADVC-300 you will get the best capture possible. This is what I do.

It will not make recordings made with non-S-VHS much better but it will not make them worse.

I capture DV avi at a high bit rate for the best quality and then render to MPEG2.

Capturing to MPEG2 was not as good.

As to what filters you use if any, that will depend on the video captured. Some parts will most likely need different filters than others. Some parts may need a touch of sharpening, some parts a bit more color and color correction and other parts may need some noise reduction.

You just have to decide going by what the video needs.

Plus, making the Audio sound clearer will make the video look even better! I'd look at the design of the Audio to so how that could be improved.

Bad audio makes the best looking video look rubbish. However, GOOD or better audio can make less than stellar video outstanding! - Oh, don't I know it . . . . . .

Grazie

I capture using a Blackmagic Intensity Pro using 4:2:2 color space. (DV is only 4:1:1 and MPEG2 is typically 4:2:0) I then uses Neat Video to remove video noise and Vegas to do color correction. I use Izotope RX and Sound Forge to clean up the audio. The results are very acceptable.

Having done this a lot, I'd like to offer some observations.

-- VHS is 4:1:1 (at best), so DV-AVI will retain everything in the native colorspace (not a lot to begin with). There is not going to be an intrinsic advantage to capturing 4:2:2, although something like BMI may have other distinct advantages (i.e., better converters and less noise).

-- MPEG-2 is 4:2:0, so there will be additional losses that will show in titles, CG, cartoons, etc. 4:1:1: + 4:2:0 = 4:1:0.

-- That being said, if a DVD is the final goal, the Panasonic set-top DVD recorders beat almost anything out there in a consumer price range. They've employed some enhancement techniques that help the reds (within reason) and reduce video noise, often to the point that the DVD is visibly better than the original VHS tape. These set-top devices employ copy protection, so your Disney videotapes are not going to copy.

-- Capturing to DV through an ADVC device or a Canon z-series camcorder works, but often requires a run through NeatVideo in VDub or Vegas to approach the noise reduction the Panny set-top gives out of the box. I think John Meyer has offered some good techniques in the past.

-- Low-end consumer devices (Dazzle et al) that capture to .mpg or .mp4 should be avoided, as the results are predictably terrible.

-- I've rescued a couple really bad VHS SLP tapes that have been sitting fifteen years, and they are viewable, if one doesn't set one's expectations too high. I wonder why we thought VHS-HQ and SVHS were all that great?

-- Hint: If you are mixing analog 4:3 with widescreen source, such as in a documentary or compilation, setting the NTSC-DV PAR to 1.0 gives it a pleasing widescreen "feel" without going overboard with stretching.

Thanks everyone for taking the time to help me with this. Unfortunately the capture device I bought does not save to AVI. The best quality is the MPEG-2 (DVD). I'm thinking that I won't be doing many of these so I'll probably keep what I've got and do one of two things: 1) Burn to DVD AS-IS. Or, 2) Apply some sharpen and color correction filters as needed.

I appreciate all of your advice.

Borrow or buy a used Canon z-series miniDV. They are plentiful and cheap.
The screen to do A->D passthrough can be tricky to find, but it works.

"VHS is 4:1:1 (at best), so DV-AVI will retain everything in the native colorspace"

Note that NTSC DV-AVI is 4:1:1 but PAL DV-AVI is 4:2:0.

If the final code is to be MPEG2 which is 4:2:0 then you can't avoid the conversion.

Peter, I forgot about PAL DV being 4:2:0.
Even though I brought it up, I take some solace in the fact that cheap consumer VHS recorders were often around 4 : 1 : 0.5