I'd say go with the TV tuner card--download ATI's updated drivers from their site, install Cyberlink's Power Cinema PVR software that came with your card, and reconcile yourself to learning how to use it. Reviews suggest that it's a really nice piece of hardware (I'd like to have a hardware MPEG2 encoder), but that Power Cinema leaves a bit to be desired.

I have ATI's old TV Tuner Pro (Philips chip), but the theory should be the same: connect your VCR to the tuner card (I use the coaxial cable and skip ATI's block thingie), open your tuner/PVR software (I use ATI's MMC stuff; you'll probably use Power Cinema), tune in to the channel your VCR is playing on (mine uses 03 as the default), and record the video to a 720x480 MPEG2 file if you're in NTSC land. This is the same format a normal DVD uses, so you can author it directly to DVD if you like.

Play around a bit. It might take you a couple hours of trial-and-error; probably it won't.

Sorry if I didn't offer much in the way of actual help. I guess I'd just like to encourage you, because if you just jump right in you'll sort it out pretty quickly.