Be careful with ultra high bitrates-- DVD max spec is 9.8mbps ( http://www.dvddemystified.com/dvdfaq.html#3.4
) which INCLUDES audio. You can go higher but players may not like it. So if you're using PCM audio (1.5mbps) that has to be kept in mind as well.
I tend to set my Toshiba to around 6.8-7.0mbps video bitrate with PCM audio for important conversions (to leave a little headroom) and am quite pleased with the results.
But yes, set it to as high as you're willing to go (for the recording space/quality tradeoffs). Setting it low "because it's just VHS" will yield a much lower quality recording. Also, many DVD recorders have various filters that will clean up sources, including VHS recordings. I don't know specifically about the Panasonic, since it just seems like rumours float around about specific circuitry. If anything, it probably has a very rudimentary time base corrector (as do most of the higher-end DVD recorders) and an "always-on" Y/C filter, which will really help.