I currently have a Sony TVR140 Digital8 and am happy with the quality. The only problem I have is its lack of storage space. I need something that will record up to 2 hours without switching media.

I recently recorded directly to Laptop (Panasonic CF-51 2G Dual Core, 1GBRam) HD using Pinnacle Studio V7. The first hour and 20 min or so was fine. After that the audio and video got out of sync. Was the issue LT specs?

Highest priority is quality. Price is an issue but willing to pay more for quality.
Camera will mainly be used indoors to record teachers with camera on a tripod.
Power will be available so battery life is of minimal concern.
Budget is ~$700USD

Maybe my current camera is sufficient I just need to focus on better PC or software for capture. Before you all say "Go Mac" that is probably not an option I am comfortable with the PC platform. May be talked into going Linux.