As for the difference in resolution, VHS material stored on DVD-R is still 480 lines, regardless of what the native resolution was. It's like taking a photo of your screen with a digital camera -- sure, your screen is only 72dpi, but the resolution of the photo is determined by your camera's chip, not the resolution of the source.
A lot of people use the limited "resolution" of VHS as an excuse to use half-D1 resolution, but you often end up with sub-VHS video quality. Using the digital camera metaphor again, it doesn't matter if your screen resolution is only 640x480, if you take a photo of your screen with one of those cheapie 640x480 digital cameras, you won't get an image that's identical to the screen display, it will be visibly worse.
How can this be if the resolution of both the screen and the camera are both 640x480? Because the 640x480 resolution of the camera limits its capability to create a clear digital image of the analog world (pointing a camera at your screen isn't a digital transfer, even if you have a digital monitor). If you could plug a device into your monitor port that would extract a digital image from it, then yes, you could get a pixel-for-pixel representation of what was on your screen, but analog-to-digital doesn't work that way.
To understand the concept behind VHS-to-DVD transfers, it might help to look at it as a film-to-video transfer. Film does not really have a "resolution", strictly speaking. The grain of the film can limit image quality, but if you use the absolute minimum resolution to transfer film to tape, you won't get very good results. In the same way, you really need all 480 lines of an NTSC DVD for VHS transfers, and you don't really have the option of using less. You're essentially taking a picture of the signal from the tape -- it's not a line-for-line transfer.
For the same reason, cutting the horizontal resolution in half is the worst thing you could possibly do, since the horizontal lines in VHS or other analog formats isn't broken up into "pixels" as digital formats are. Therefore, using half of DVD's available 720-pixel horizontal resolution means you get an image that's only half as good as the picture you'd get using the full 720 pixels. If you had the capability to cut the number of lines in half so you only had 240, it would actually have less of an effect than using half-D1 resolution would. Unfortunately, that option is not available.
The bottom line is, if you go by the "resolution" figures of VHS to justify using less than the full 720x480 resolution of DVD, you're gonna end up less-than-VHS-quality. If you're okay with that, great -- it just blows a hole in the myth that simply transfering VHS content to DVD is an automatic improvement.