For maximum quality here is my procedure: ADVC300 > iMovie 06 > iDVD 09/11.
To get your VHS video into iMovie, use the Grassvalley ADVC300 . With the ADVC300 Audio and Video go in, FireWire comes out. It also comes with a nice Macintosh application that works flawlessly with iMovie 06 and iDVD 09/11 (I have used it a few times with iMovie 11).
The ADVC300 has been discontinued by the manufacturer. The included software (which is not really necessary but does enhance performance) is not compatible with OS 10.7 or newer. You can still find the ADVC300 for sale in a few outlets as well as eBay. It will sell between 50% and 100% ABOVE its retail price. Yes, it's that good.
If you can’t find the ADVC300, use the Grassvalley ADVC110.
I have a drawer full of analog-to-digital converters. After using the Grass Valley ADVC300 I find nothing else acceptable.
The program that comes with the ADVC300 has some nice filters that can improve video and audio of the source material. The ADVC300 will take Audio and Video from any source (VCR, Tivo, Satellite Receiver) and convert it to FireWire (iMovie will treat it like a camera).
I would use iMovie 06 with iDVD 09/11, why?
iMovie 09, 11, and 13 uses 'single field processing' meaning every other horizontal line of the video is thrown out, which reduces the sharpness of the footage. iMovie 06 uses ALL of the image to form the video. (Also the latest iMovie CANNOT set Chapters !!)
After lots of experimenting I get the best results using OS 10.6, iMovie 06, and iDVD 09/11. My movies look just like Hollywood!
My primary computer is a Mac Pro, so I just use one of the four hard drives and boot OS 10.6. You can also partition a single hard drive to achieve the same results.
This may seem like more trouble than you want to go through. However, I find the superior quality to be well worth it.