Ozbash, DVD uses pretty much the same file formats as a lot of PC video (MPEG) so caputuring from DVD isn't a problem, as long as you have a DVD-Rom drive in your PC (about $300, replaces your CD-ROM and also reads CDs) and a lot of hard drive space. A DVD holds up to 6GB of data though, so you need a lot of HDD space, thats why your video CD could only hold 39min, as a CD-R only has 650MB of space. As you've noted uncompressed video is a HUGE space hog, my mate does professional editing and the new system he is putting together has 120GB of HDD space. As for writing DVDs, DVD writers (DVD-RAM) are expensive, rare, and the blanks are VERY expensive, so you're better off sticking to CD-R.
What you can do is to compress your video to MPEG-4 format, which allows you to fit around 90 minutes of near DVD quality video onto a CD-R. You'll need a program like FlaskMPEG to do this. The only drawback of MPEG4 is the massive amount of processing power required, it takes hours to render a 90min section (basically you have to start the render and let it run overnight) and you'll need at least a 600MHz PIII, Athlon or Duron CPU plus 128MB of RAM and a decent video card to ensure smooth playback.
An alternativre to a dedicated capture card is a video card that hasvideo in and out built onto it, these are available for around $500 for one based on a Geforce 2 MX chipset and mean you don't have to use an extra PCI slot, and are are worthwile investment if your video card could do with an upgrade as well. Capture quality is pretty good, although not quite up to professional standard.