I have used the Adaptec Videoh USB add on box with complete sucess. The package comes with Sonic MyDVD version 5. It is worth paying the extra to upgrade to version 6 once you have got the initial set up running.
The Adaptec set up cost about £100, have a look at the Novatech site.
It is worthwhile putting in a second HDD purely to store the captured video until you have burnt it to DVD. Capturing at best quality will mean you use about 3Gb per hour of VHS tape.
Also increase your Ram to about 1Gb if possible.