If you use the ATI card to capture then use it outside of Vegas. Select the input (composite or s-video).
In the "Video recorder" setup choose the largest size available. Usually 640x480 avi should work.
Choose record and play your source. You may get dropped frames if the PC can't keep up.
Then open the file in Vegas.
Under the Video menu in VidCap are choices for "Video Capture Properties" and "Video Capture Capture Properties". Choose the second option and you will be able to select an Output Size. Oddly enough, the format is already set to 320x240 by default even though it captures 320x480. *shrug*. Just pick what you want and it will change to that.