if i've got a lot of hard drive space, or if it's important i'll use DV as my intermediate format, if not then high bitrate xvid.
if you use mpeg1, it'll be bad quality. simple as that. sure, your second method will be better than the first, but only due to less encoding. It'll still not be as good as it should, and could be.
AMD Athlon 1700 (@2200mhz from 1466 sod the noise!) - 768mb pc3200 - 200GB Maxtor - Pioneer 106 - GF4 Ti4200 - twinhan/visionplus pci dvb-t - random pci analogue tv tuner - A7v600-x (to replace the a7n8x-d that died...) - random 17\" CRT
Sony STR-DE425 & Eltax c205s;
xBox w/20GB HDD- executer 2.3b;
xBox - standard;
Konica/Minolta dimage z10 w/2x512mb SD;
A silly amount of Cat-5 and usb cables