Video capture and editing

I hope one of ya’ll can help. I have been trying to edit video for months and am close to calling it quits. I have some old vhs camera video from an overseas project that I would like to edit. I need to cut out the extraneous stuff, put in some transitions, add some titles and banners and perhaps add some audio commentary. I have a total of 3 hours of tape that I would like to edit down to 2 half hour segements. I want to output to both vhs tape and svcd.
I have ATI media center and videowave version 3.5. After several reinstalls, I was finally able to get video wave to capture to mpeg2 at 352x 240. It looked okay, but not great. One problem is the 4 gig file limit of fat32 (windows 98).
So my questions are:
Is there a better freeware (I am cheap; the card and videowave were giveaways) editing programs that can do all the things I have mentioned?
What is the best solution to the 4 gig limit (Please, don’t tell me to get MS XP)?
Is there a better capture program (free)?
What resolution should I try to capture at?
Why do most sites recommend or require that capture be to .avi? I have tried that and dropped 20% framerate. Also the audio would be out of sync. Should I not just capture to mpeg 1 or 2? Is there a way to capture to divx so that I can capture more than 9 minutes (4 gigs)? I guess the problem then would be how to edit the divx file.
I see that there are some hacked drivers for the capture card. They are bt8x8 WDM drivers 3.1.28 tweaked by IvUs. Will they help?

I know I have a lot of questions, but any help will be greatly appreciated.

My system:
Iwill KK266+ (VIA KT133)
AMD Athlon 1600+ XP
ATI All-in-wonder pro 8 meg pci
Windows 98
256 Meg 133 RAM
40 gig Western Digital HD 7200 rpm ata 100 (master)
20 gig Western Digital HD 7200 rpm ata 66 (slave)
Liteon 48128 CDRW

Hmm I’ll try to answer some of your questions

The reason why avi-capture is prefered:
usually generates the highest quality from your input; output quality can never be better than the input, so it’s best to do the input at the highest possible quality.

Why this avi-capture doesn’t work without framedrops? Well, you’re capturing analog video which puts a very high stress on your HD. Depending on the capture resolution, this can be 3MB/sec and more. Even though ata66 means 66MB/sec, this is only the maximum bandwidth the IDE channel provides and is never achieved by the HD. In fact, most ATA66-discs are not capable of capturing at that SUSTAINED speed; they will do for a few seconds, until the heads have to reposition, which causes massive frame-drops.

How to solve this?
You can try changing the HD’s; put the ata66 as master, with the OS (sorry, again reinstall…) and the ATA100 on the secondary IDE as master; completely EMPTY (= not fragged). Now you can use the fastest drive for capture only, which is the best situation. (try first without the Lite-on connected)

About the fat32 limit… I’m not sure, but there might be a patch to allow NTFS in Windows98. NTFS is the WinNT based filesystem, which allows “unlimited” files.

About the software… I always use Adobe Premiere, but that’s no option here, since it’s quite expensive. You could try with VirtualDub (=free!), although I haven’t used it for capturing myself. Maybe someone else can help you with this.

The hacks you mention, make me think at the hacks to allow free Canal+ TV on bt868 chip-based TV-cards and equivalent. So if it is that sorta hack, it won’t make a difference for your problem(s)

I hope this helps you