Horizontal lines when capturing video

[ironic]

I want to capture some old footage on S-VHS tapes and put them on a cd for storing. i´ve tried to use virual dub and virtual vcr to capture, but if i dont use software compression i get huge files. with divx 5 and xvid i get much smaller files, even with high resolutions, but when the picture moves sideways i get a lot of horizontal lines that i suspect are caused by interlacing. i´ve tried capturing with interlacing on and off and i always get the same result. anyone knows how to terminate the horizontal lines? i would also aprecciate a suggestion about optimum resolution for capturing from S-VHS without loosing quality and without getting a too big of a file... Tks (pinnacle pctv pro capture board,xp)