Best video Hardware/software for converting VHS DVD and others on Mac?

Hello,
I am having problems finding some much needed details on what the best software/hardware is for converting video formats on a Mac. I should note I am using a NEW iMac 4GB memory and Leopard OS so what I use needs to be compatible. Perhaps next year I will get a Mac Pro, but for now I'm using this setup. Here's is what I need to do:
1. Transfer old VHS tapes (home movies and such) to DVD. I need to be able to use DL DVD discs for my recordings so I don't have to switch DVDs. In other words make them just like the DVDs you play that you buy. Therefore, they also must be able to playback in home theater DVD players, not just on the computer. I would assume the best way as for encoding is to get the VHS tape in digital format on the hard drive, then use the codecs to turn them into DVDs?
2. Once on the hard drive I also need to convert them to a format neutral playback on both the Mac and PC. What is the best, MPEG 4?
3. The ability to do some nice editing of making bookmarks, chapters and thumbnails for the DVD menu and divisions I wish to make. In other words, if I have a home movie containing my Summer and Winter vacation, I want to insert bookmarks at points to skip to like in a movie DVD and also have a thumbnail of it just like DVD movies does.
4. A nice MAIN menu for the DVD that will let me hit the main categories, not just chapters for the TOP level DVD menu. Such as Summer Vacation, Winter vacation.
5. The software should be easy to use so I don't have to take a HUGE crash course requiring lots of work making the project a chore. Also, I don't want or need a professional package, just something simple that is less than $200 per software program. Not the expensive $500+ software options for movie makers.
Thank you for any tips and advice on this matter.

"Best software/hardware" depends on your exact needs & wants.
One simple way to transfer your VHS tapes to DVD is with a *DVD Recorder*. Many of these come with VHS and DVD decks already built in. Insert your VHS tape, a blank DVD, hit record and off it goes. When finished, you have a playable DVD.
To transfer your VHS tapes to DV for editing you will need a converter. The *Canopus ADVC-110* is a very nice, relatively inexpensive device that will do that job for you. (It's also possible to use most modern DV camcorders as converters, too.) You would connect your VHS deck to the Canopus box via their analog video & audio connections, then connect the Canopus box via FW to your Mac, and then when you play the VHS tape you would capture the video in iMovie or FCE.
Once your videos are captured on your Mac, you could use iMovie or *Final Cut Express* to do whatever editing you might want to do. Regardless of which one you edit with, however, it's iDVD that you would use to create your DVD menus and burn your DVDs.
So, overall, the workflow would be like this: *VHS Deck > Converter (camcorder or converter box) > Capture on Mac (iMovie or FCE) > Editing application (iMovie or FCE) > iDVD > DVD*
For playback on computers MPEG4 would be an ok choice, H.264 is probably a better choice, and then there's the matter of whether or not you want to export as a QuickTime movie and/or AVI.
iLife came with your Mac, so you already have iMovie and iDVD. How about giving them a try before you consider investing in a significantly more sophisticated application like Final Cut Express. (just my opinion)

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