Its not best to encode directly into a compress format. You want the original be clean. Either use raw video codecs or DV. To get all the lines that VCRs put out. You need to record at 352 X 480 for NTSC and 352 X 576 for PAL. What this does is it captures all the lines. Remember TV is interlaced and computers are non-interlaced. Then use a program to deinterlace or use BOB and resize the picture to 352 X 240 for NTSC and 352 X 288 for PAL. Finally you can make a compress video format like MPEG-1, MPEG-2, Divx, etc.
Go to
http://www.dvdrhelp.com/ for more information.