You need to capture in the highest quality codec that your capture hardware can handle, even if that means temporarly taking up tons of disk space. After the capture in high quality (say mpeg2 or mjpg) convert to a codec that offers higher compression. Do not try to capture directly to a highly compressed format cause computers are not fast enough to do this yet. There is a new mpeg4 chip out and that chip would allow coding directly to mpeg4 but unless you have that chip you need to stick with mpeg2 at least for the original capture. When you convert to another format make sure to use the same frame rate as the original capture or it will skip.
NOTE DVDs are different. Because they (most big Hollywood movies) were originally recorded on film the original recording was done at roughly 24 fps on film and then converted to roughly 30fps for dvd. You can reconvert using telecline back to 24 without losing anything and without any jerkyness as long as the original was shot on film. If the original dvd was shot on tape (like most pornos) then you can't convert to 24 smoothly.
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