Thanks for the suggestions. As far as codecs are concerned, I tried CyberLink, InterVideo NonCSS (came with HVR-2250) and ffdshow. They all exhibited identical behavior. I wish I would have known it was an XP/VMR9 issue before I started this whole process as it would have saved me a TON of time.
Thanks for all the suggestions. I appreciate you taking the time to reply. To keep the wife happy I returned most of the hardware to NewEgg this morning and will just go with Tivo.