Yes you should definitely use your miniDV camcorder as an analog --> digital converter. Any video capture card that uses a USB cable is sub standard and will produce poor quality transfers.
You should connect your VHS-C/VHS deck to your miniDV camcorder using an S-Video (preferably) or Composite cable and then use a Firewire cable from your miniDV camcorder to your PC.
You will need to ensure that your miniDV camcorder has analog pass-thru enabled.
To 'capture' the video on your PC, use Adobe Premiere, Sony Vegas or even Windows Movie Maker (but make sure you tell WMM that you're capturing DV-AVI). If you want a simple and straight forward capture program, check out WinDV: http://windv.mourek.cz/
Files captured by the above method will be approximately 13GB / hour in size.
Hope this helps. If you have any further questions please ask