Analog Video Capture
The way Digital Video editing has been done in the past was to take a video capture card, hook up your VCR or LD player to it, and then capture clips to your hard drive. This is still a very viable method (and indeed the only good option open to you if you don't have DVDs).
A Video Capture card will usually have a video-in connector - either Composite video (the yellow plug with one prong that usually comes in a set of 3 along with a left and right audio connector) or S-Video (usually a black cable where the plug has four or six pins coming out of it). There are some with Component but if you have a card that does Component you don't need to be reading this guide.
Most video capture cards will work with a program called VirtualDub. This program has a built-in capture function that works better than anything else out there. It does everything you could want, and generally faster than any other program. However some newer capture cards (like the ATI All-In-Wonder Radians) do not come with the standard type of driver and so VirtualDub cannot capture from them unless you use a wrapper which works in Windows 2000 (and NOT Windows XP). Instructions for getting this wrapper to work can be found at this page on VirtualDub's site. The DV500 comes with a Premiere Capture Plugin, and thus it also does not work with VirtualDub.
Install VirtualDub and then run it and select Capture AVI from the filemenu. If it comes up and says there is no capture device, most likely your capture card is not supported. If you would like to experiment, check the documentation sections at VirtualDub's homepage.
When you go to capture your video, change the color format to be YUV, YUY2, UYVY or something similar if the option is available. This will give you better compression later. Then select a video compressor. I recommend selecting Huffyuv as it compresses fairly fast if you have a good computer and it is lossless. However, your hard drive may have trouble capturing at bitrates that high.
Then select your capture resolution. First try 720x480 or 704x480 if it is available. If you try capturing with these and you get dropped frames, try lowering your resolution to 360x480 or 352x480 if you can. This will maintain all the vertical resolution and scanlines and simply drop half your horizontal resolution.
If you start to get dropped frames, make sure that "preview" is off, and you are either capturing with Overlay or blind since this will save CPU cycles. Also, obviously close all other programs and make sure you aren't doing anything else. Capturing video is very processor intensive. It's also recommended to have a lot of free space handy on whatever drive you're capturing too, as well as defragmenting the drive. Defragmentation can give HUGE speed increases (in the neighborhood of 3x speed increase) when it comes to working with large files.