MPG for VHS??

I have a Dazzle DVC and I can capture MPG directly but when I try to play it to an external moniter [or to my VCR] there seems to be a significant loss of quality, color and even jerkiness and pixilation. Is MPG only good for recording for computer playback? I capture at a video bitrate of 270,000 [which Dazzle says is very high quality] and I have 128mg ram, 5 gig HD and an AMD 300 k6-2 CPU. It plays back fine on the computer, but poorly when ported back out through the Dazzle unit to an external unit.

Suggestions?

thanks, tim.