Option 2 for sure. DVDs are highly compressed, avoid doing that. But the best way to do it is pick up a used Digital 8 camcorder with firewire. It has a built-in time base corrector (TBC) and digital noise reduction (DNR), and it will convert your analog tapes to a DV signal. Then you can just capture on your computer using firewire. The money you spend on a used camcorder, you will save by not having to buy an analog capture card.