Good to hear you're getting on well with the firewire, ELV! I assume you're capturing the video as full DV-AVI, then compressing it to MPEG2 when you want to make the DVD?
All MPEG encoders will in theory lose you quality (they squash your video file down to about 1/5 of its original size to fit on a 4.7 GB DVD). Better encoders will give better results, although how much better is partly a matter of opinion. And on what TV / screen you're playing it on! There was an interesting discussion on here a few weeks ago about different encoders, and the person originally asking the question decided they actually preferred the output from the built-in encoder on their video editing programme to the ones he tried on separate encoders!
General rule of thumb is you can fit 1 hour onto a DVD (at a data rate of about 8 Mbps), giving excellent quality, usually looks to most of us as good as the original. Anything up to 1.5 hours on a DVD (squashed down further to a lower rate of about 6 Mbps) should still be fine.
Once you get up towards 2 hours (4 to 5 Mbps), you'd be more likely to really see the differences between different (more expensive) encoders. If you're getting close to that, then it can be better to use the "Variable Bit Rate" - which means the encoder will use more data to encode the "difficult" bits, and save space by using less data to encode the "easy" bits. And yes, if you're doing that, it's definitely then best to use a 2-pass (or more!) encoding. That way, it analyses the video first before starting to encode, to give the best output possible. Hope that makes a bit of sense!
