Trevor what kit do you have? Also what's your source input?
I'm capturing from a TVcard using Virtual Dub using the HuffyUV codec (so it dosen't drop any frames) and then re-encoding this with WinAVI to give either a VCD/SVCD/DVD to burn with Nero.
2Hrs of footage for me is around 16GB with the Huffy codec, which re-encoded is much less and fits easily on a DVDR.
BTW I'm using WinXP Pro + SP2, on an old Athlon system with only 256MB Ram.