Why poor quality video via ATI AIW / MMC TV???

I just bought an ATI All in Wonder Radeon 7500 video adaptor. I'm
using the TV Viewer / Personal Video Recorder software to capture
input from a VHS tape deck. The quality of the video is bad and I'm
trying to figure out why ... I bought the AIW card thinking I would be
upgrading my video capture capabilities ... not taking a step
backwards!

The scene I'm using to test my new ATI card is handled just fine using
the same PC but different "preview hardware/software" (see end of
message for details).

I think this problem is related to the ATI's "TV software" DISPLAY
capabilities more than the CAPTURE capabilities. The "bad quality
video" I'm referencing shows up when I preview/watch the video in the
ATI TV viewer, even before I capture it. And I see the same bad
quality if I go ahead and capture the video, burn the digital video
onto a DVD, and then play it on my set-top DVD player (on the TV). The
problem is there at every step along the way (i.e., the CAPTURE
process is working fine ... it's just that what's being captured is
not good!).

The "bad video" I'm referencing involves "jagged edges" on what should
be smooth vertical lines. For example, person standing in front of
wroght-iron fence ... the bars in the fence should be straight and
smooth ... the person's silouette should be smooth (but not straight).
In both cases, on my display, what should be straight edges are jagged
instead.

I can post an image showing this phenomenom, if that would be helpful.
In fact, I can post two images ... one showing the problem (as it is
with the ATI card) and one showing the same image but with NO problem
(video captured on same PC, using different setup ... no ATI hardware
or software).

Any ideas on why this is happening or how I can correct it? I've tried
playing with the ATI TV / Personal Video Recorder "video soap"
settings, and other ones too, but none seem to make any difference.
And I cannot find any settings in the TV viewer to change ...

My PC's has Soyo Dragon Lite P4X400 mobo, with Intel Pentium 2.4 Ghz
CPU, 1.5 GB DDR SDRAM, the ATI video adaptor, etc. I have loaded
VIA's Hyperion drivers version 4.48, ATI MMC 8.9 (even though the TV
application says "8.1" on the splash screen), and 7.991 ATI video
drivers (6.14.10.6430 Radeon driver).

The setup used to capture my "test" video was:
1. Configuration that works (no "jaggeds"): VHS deck connected to Sony
digital camcorder (where MPEG2 encoding takes place) which is then
connected to PC via IEEE 1394 cable. Ulead VideoStudio7 used to
capture (really just transfer) video.
2. Configuration that does not work (introduces "jaggeds"): VHS deck
connected to "input head" that came with ATI AIW card, which in turn
is connected to the AIW card. ATI TV 8.1 / Personal Video Recorder
used to catpure the video.

Thanks!