Nero can do it, but it does not do it well. If you want to work with video, I highly suggest you check out www.videohelp.com. There are guides, tutorials, and software links as well as forum discussion as to what works best for specific setups. You first need to decide what quality you need from your end result, and how professional you want it to look. Then you can decide what will work best for you. If you are just doing this casually for fun, I suggest ulead video studio 8 or 9. For around $40.00, they both give good results with an all in one solution. If you want to save in divx or xvid format, or psp, you will need to look into seperate or different solutions. There are good freeware programs to capture video, good freeware programs to edit video, but you will really need to spend a few bucks to encode(burn/convert) your video to dvd (if you want decent results). I do not recommend Pinnacle software, as it can be very buggy and problematic.
For amature video: Ulead Studio, DVD Movie Factory, Sony MyDVD
Semi-Professional: Adobe Premiere Elements, Sony Movie Studio
Professional: Adobe Premiere, Vegas 5 or 6, Avid Liquid Edition, etc...