Last things first. It will not improve quality. If it is not there then that is it.
For VCR to DVD you will require some hardware and software if you do not already have it.
To capture the video to disc is the first step. For this you will require a capture card that will accept analogue in. The source could be your camera or VCR.
The second step is to edit the video, if required. For this an editing programme is required. This sometimes comes with the capture card. I believe that there is limited edit facilities in XP.
Then the final step is to output to DVD. The captured video requires encoding and burning to DVD. The burning programme that came with your DVD writer should deal with this.
The final written DVD disc is not always compatible with stand alone Players. You would need to check this out carefully.
Try here for some good information. click here
There are more keen video editors here on this forum that may have done just this thing so hang around and put your query back to the top if needed.
PS I write CD in VCD and SVCD but have no experience of DVD writing.