As I type I am doing what you talk about.
I bought a Pinnacle Lynx USB cable (£30) which connects to the VHS. The Pinnacle Studio 8 software that came with it captures the video and lets you edit out the bits you don't want. This can then be saved as mpeg files. This can then be written to CD's in VCD or SVCD format. This is nowhere near the quality of DVD and with the price of DVD burners dropping all the time this is fast becoming VFM.
There are other ways of acheiving what you want but they all involve having a device to capture the video and software to edit and burn the created files.