Hi
When you capture you have many templates to choose from.
DV-DVD-Mpeg-Wmv etc
If you chose DV then the quality would be as the camera footage and be saved as DV-AVI.
Any other choice and the program has to re-code the data.
All other options may requires the user to customise the properties.
As an example if you chose mpeg you may have properties not dvd compliant.
So what were the capture properties
They may be ok but without knowing what they are we cannot comment.
And as you indicate that the source footage is pixelated we can only go back to the start.
Trevor