The 1's and 0's don't care if they make up one file type or another.

"As it stands now my HD becomes fragmented and can cause errors anyway."

Say what? Many years ago we had very slow systems and that could be a problem during capture. Today I don't see this anymore.

"If anyone has a suggestion of software to reduce transcoding/DVD authoring errors it would be appreciated, I prefer freeware. I've tried Arcsoft ShowBiz DVD 2, Sony Vegas, VideoReDo, and Pinnacle Studio 10...none are worth their price tag to me."

Since the full version of Sony Vegas was for awhile all of 99 bucks it appears you will have to stick with what you can scrape up for free. Try VLCPLAYER for transcoding. Works without having to hunt down CODECs.

As to DVD authoring errors that never happens to me. Must be some buggy software you have today.