you can get alot of info here.
http://www.dvdrhelp.com
I have a hauppauge Win-TV FM. I have had minimal luck capturing. I believe, when i did capture something, i encoded directly to MPEG-1 and then edited it using VirtualDub, then re-encoded it to Divx.
It's hard for me to say what the quality was like because I was capturing from a VHS tape which had been made from a first generation 8mm camcorder. Yes, first generation, 8x zoom from about '94 i'd estimate. So the quality was bad to begin with.