There is a mutltitude of options open to you.
To get VCR into a PC you need a dedicated capture card. I personally use a DV500 card produced by Miro/Pinnacle. It is excellent. If you look on EBAY you should be able to pick one up, should come bundled with Adobe Premiere 6.5. Although 6.5 is old it is still excellent. Provides MPEG2 encoding from the timeline.
Or another good tool for inputing VCR into a PC is click here
With this though you would need to getting Editing software. Adobe Premiere Elements 1 is good and will let you output ot DVD with Menus etc (I have tried this program). Adobe Premiere Elements 2 is out now.(Not tried)(£69 in PC World bundled with Photoshop Elements 4).
One of the most stable editing systems is the Sony Vegas family. Sony Vegas 6 is excellent.
As an alternative buy a DVD Recorder, capture to that, then transfer to PC, and editing out what you want. I have just done this , editing out adverts from various music videos for my daughter. Toshiba DVD Recorder bought from Comet (£119), then transferred to PC, seperate movie and audio streamed out using decryptor (what a shame) then multiplexed to MPEG using TEMPENC Express 3. Imported into Vegas 6, edit out the commercials, then remade. Burnt back to DVDR for my daughter. Excellent. MPEG editing is mimited though. And as it already compressed can become lossy.
The BEST route though for quality, would be input to PC, edit as AVI then output to DVD.
Hope this helps.