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The chances are that it is a mix of the PC and software capabilities.
I assume that due to you only having a 40Gb HDD you are doing the DVD conversion in real time. If this is the case then you need a very powerful PC to handle real time MPEG-2 conversion. Also the MPEG-2 encoder needs to be good, but in most cases will still struggle.
To get the best results you need to capture to the HDD and then do the MPEG conversion, which will normally take far longer than real time. This will normally take around 14Gb per hour of footage for the capture and then more space for the conversion.
If you are captureing to the HDD first then it sounds like a settings problem. Do a search on this forum for 'DMA' as a giude to the possible problems.
Mark.
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Lexicon MC-8B. L/C/R: Blue Sky 6.5's, SL/SR/SBL/SBR: Blue Sky 5's, Sub: Velodyne DD-15
Panasonic NV-HS830, VTX-D800U via TiVo, Arcam DV29 & Sony BDP-S500 > Lumagen VisionHDP > Panasonic TH-46PZ85B. Marantz RC9200
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