get an analogue input card such as a TV Card (i use an old Hauppauge card). this should cost you as little as £30. it will let you record direct from the VCR at 640x480 or 768x568 resolution. you obviously need a DVD writer (current favourite is the DVD+R format which is said to be more compatible with existing players). then get software such as Nero or TMPGEncoder which will let you convert the video from 'AVI' into the DVD format ready to burn.
alternatively you could pay more for less hassle and buy a stand-alone recorder such as the Philips 880 which will stream straight from your VCR onto DVD+R in 'real-time'.