Mike, dropping frames may be the fault of your cheap capture card and/or insufficient RAM. Make sure you have the latest WDM drivers, try lowering the capture resolution and bitrate or better yet, invest in a real capture card and at least 512 megs of RAM.
PAL Video for Windows, 720x576, framerate: 25 fps. These should be your capture settings.
Capture Uncompressed AVI if you plan to edit (it'll take some 45 gigs for an hour!).