One thing to do when first receiving the PVT is to update it's firmware. You can download new firmware HERE. Pinnaclesys.com/pvtsupport. Simply copy the downloaded file to an empty USB thumbdrive then plug it into the PVT. Full instructions can be found at the link.
The three recording modes are there so you can choose the best video format for the device you intend to put it on. There are Good, Better, and Best modes with Best being 720x480 interlaced (DVD quality), and Good and Better modes supporting devices with smaller screens.
I found the PVT easy to set up. It came with it's own A/V patch cable, but you may want to get an A/V switch box or multi-output receiver to allow monitoring the video you are recording.
Results depend on the quality of your source. VHS tapes won't have the resolution of a DVD. Cable and Satellite boxes vary in the quality of their composite or Svideo output. Garbage in, Garbage out. Work with the best source you can. Svideo should be better than that yellow RCA composite signal.
Conclusions: I used an old VHS tape of Lost In Space to test the "better" mode, and ended up with a 640 x 480 .MP4 video file. The file played fine in iTunes, although with a bit of scrabbled scan line along the bottom edge which I'm sure was due to the VHS format not actually supporting 480 lines. My VCR had shut off and ejected the tape when it was done, and the PVT stopped recording automatically when the video signal was lost.
I haven't tried the Good or Best modes yet, but will update this blog post when I have. iTunes had no trouble syncing the digital copy over to my iPod Touch. It took a few minutes, but when finished I had a MP4 version of a VHS movie playing on my iPod, and it was nearly as simple as just waiting. You'll have to wait for the source movie to play in real time, then wait a few minutes to copy that movie from the thumb drive over to your iPod on your PC. This was far less painful than the process of ripping a movie from a DVD onto the computer and converting it to play on the iPod. I highly recommend the Pinnacle Video Transfer.
A Good price HERE. Newegg.com.
Some more photos HERE. Newegg.com.