I have three methods (in order of goodness):
1) A Sony Digital 8 camera. It can play Analogue 8mm tapes or take analogue from VHS via cable. It transfers in MJPEG format (high quality) via firewire. Using it without tape on external video is called a Analogue-Firewire bridge, these can be bought separate from a camera and are a 1/4 of price of a proper professional video capture solution and just about as good.
2) A DVD recorder /player / tuner. It makes MPEG2 DVDs directly at two quality settings. It's nothing like as good as the Sony camera.
3) An Ancient ISA based real video editing card. The host computer though can't manage capturing more than an hour of video. It uses MJPEG format, but lower quality than DV/Firewire.
USB video capture devices are all rubbish. They are web cam 320 x 240 @ 30fps, or if you are lucky 640 x 480 @ 30fps. Few do European 25fps.
VHS is roughly 300 x 576 resolution @ 25fps interlaced in Europe. To avoid aliasing you need to capture at at least 600 x 576i @ 25 fps. S-VHS is maybe about 500 x 576 resolution (for B&W component, colour is about the same). Colour resolution is low on VHS.
PAL (the content on European VHS) is normally encoded at 720 x 576i @ 25fps for best quality, or 544 x 576i on satellite or DTT to save bandwidth.
You need a capture device (HARDWARE) that works for PAL and captures 720 x 576i 25 fps. A Y/C input and a VHS that can play Y/C will improve quality. It will have the capture drivers.
Then you use SEPARATE software to optionally edit.
Then you use yet more separate software to create MPEG4 for youTube/PC/video player, or MPEG2 for DVD, or H.264 MPEG for BluRay or whateever.
Then different software to author menus etc for DVD or BD.
Of course there are free solutions for Linux and Windows. Horribly expensive SW for MAC.
There are "all in one" video packages.
The MOST important thing is decent Analogue Video Capture HARDWARE, that works for PAL not just USA/Japan. I don't know what Microsoft's own free video editor/video format creator is like now, but last time I looked, it only did USA /Japan formats.
Transcoding European to USA frame rate is ghastly, all horizontal movement "ghosts".