For video editing I would recommend 512Mb of RAM, but 1Gb would be better!
As for HDD, any modern drive will be plenty good enough spec. Get at least 120Gb (well under £100) and only put your captured video files on it, do not install any programs and this includes the editing software. Install this drive as the slave on the primary IDE channel with the boot disc as master, with DVD etc on the secondary IDE channel. Make sure DMA is enabled in device manager for the drives.
If you have Windows XP then you have the very good Movie Maker editing software. Instructions for useing it can be found at
www.papajohn.org
If other than XP then you will need to buy editing software. I can recommend Ulead Video Studio 8 as a stable and well featured package. Pinnacle Studio 9 is also very good, but many people find that it keeps crashing. Also look at Sony Vegus. All should have trial downloads so you can try them before spending money.
Many camcorders are supplied with some software, but this will not allow full quality AVI capture & editing. It is normally designed to capture still images from the camcorder.
Firewire is the
only way to connect the cam to PC and capture at full quality. USB2.0 is just not fast enough, even though it is in theory faster than FW it can not sustain the full speed needed. Many modern PC's will have firewire (aka ieee1394, iLink, DV port) on the motherboard. Look for ieee1394 in device manager.
Good luck and welcome to this great, but very confusing at times, hobby. Let us know how you get on and feel free to ask any more questions that you come up with.
Mark.