OK guys, I think I've cracked it!
Thank you SO much for all your help - everyone who replied.
Mariush: thank you for your advice. I tried x264 - however, I found that Nero Vision did the trick. I set it to transcode my AVI to MPEG2 in two passes, and to fit on a DVD9 utilising the maximum space. This is just what I needed.
Also, Mounir - thank you for the suggestion about Fly2000TV. I tried it, and it works well. I have been using Debut Video Capture over the last few days - which is also good, but for some reason it could only capture in 30fps. Then I had to use VirtualDub to convert it to 25fps, at the same time I was cropping the "overscan" from the bottom of the VHS (another issue I found out about!) It's a software problem - not hardware - because other programs, including Fly2000TV can capture in 25fps.
Anyway - with Fly2000TV, Lagarith, VirtualDub and Nero Vision I am at last able to capture exactly how I want.
Thanks a lot everyone!
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