I've got the AIW 9800 Pro and the quality is strictly dependent on the settings of the capture program. You can select from 4 basic levels or a custom. Even on the second best of the four I get dvd quality recording.
Another problem could be that he didn't choose to record it in mpeg2 format. When he went to burn the DVD it had re-encode the video file, and anybody will tell you that re-encoding a compressed file will lead to quality loss.
Anything higher than a 1.5Ghz will do fine for on the fly compression and having a defragged hard drive helps too. I don't have any problems with mine, but I've also got a dedicated HTPC with a second HD for video recording. Bottom line is that you can get higher than DVD quality video with no problem, but it depends on your settings and how much space you're willing to take up.
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"Empirically observed covariation is a necessary but not sufficient condition for causality" - Edward Tufte
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