As the man says, you're gonna be constrained by at least your input quality
. With a reasonably powerful PC, you can achieve "perfect" copies of VHS without buying additional hardware. For analogue video capture, I use the video-in connection of my graphics card (a now ageing Asus VS9280) combined with virtualdub. As I very rarely edit the footage, I normally capture straight to the destination format - either Xvid or MPEG2. If your having problems, try reducing the framesize etc...
I'd take a look at the hardware you've got now and try again. You'll probably be impressed with the results!
Additionally, if you've got a DV camcorder, think about using this as an analogue to digital converter. But if you really do want to spend some money, go for something like the canopus ADVC50. I found this
here and
here for less than £200.