Capture your footage at full AVI resolution and export/create your movie at VCD resolution. The method you are currently using is quite correct.
in my project above, i used 720x480 as project setting and i also noticed that my captured AVIs were at the same resolution. i however learned that standard VCD resolution is supposed to be 352x240 (?). how's that? should have this affected the quality of my final cd output? or should have i set the project resolution to 352x240? what about the captured AVIs? should i also capture at 352x240 to achieve best quality? also, i used several Ulead project files for my movie. prior to burning, i made something like a final mix so that it was necessary for me to create video files from the other Ulead project files. from these i created MPG1 files and then inserted it on my final mix project file and then burned it to cd. did i do it correctly?
COMPAQ something or other with 500Gb Boot Disk, 1Tb external Firewire Disk, 4Gb Memory and a super duper sound card, 19" TFT Monitor etc etc etc
Sony TRV33e : Sony TRV310e : Canon XM2
Sony Vegas Studio editions to v11
Remember, there is always more to learn than there is to teach.