What do you recommended for capturing VHS for archiving on a HDD? Will DV PAL codec do? H264 at high quality? (I'm PAL over here btw). I want to retain the quality, but at the same time I don't want 60GB per hour...
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DV has a something of a focus on simplicity, so it can be encoded with primitive microprocessors and decoded quickly in an NLE. In particular, it's intra-frame: a DV file is basically an array of still-image files. That's useful for professional editing; it means however DV can't achieve nearly as high compression ratios as more complicated formats with P- and even B-frames – space used to be not so much of an issue since magnetic tape fits quite astonishing amounts of data.
So DV isn't really a great format for archiving, it takes up not 60 but easily 10 GB per hour. And that for SD quality, albeit with very little compression artifacts.
h.264 is much more space-efficient, and its higher computional cost isn't much of an issue now everybody has a fast, at least duo-core processor at hand. You can easily get VHS-like–quality files down to about 1 GB/s with h.264.
It's pretty much the canonical format now. The main alternatives I'd suggest are free alternatives, mainly
This so far applies to pretty much any kind of video, not just VHS. All of these formats support PAL resolution; Theora doesn't have interlacing, but switching to progressive-scan prior to compression is no big deal and might in fact be a good idea anyway. Just make sure you use a good deinterlacing algorithm.
For archiving VHS I suggest using MPEG2 720x576 as the best format in terms of quality/space. DV is 12 GB per hour, but this is the best format for editing. H264 takes up much less space, but it is the delivery format, not for editing. MPEG2 is a compromise. In addition, you can burn them to DVD w/o reconverting.