For shure that card came with PowerVCR or WINDVR, programms which do record in mpeg2 directly using a fast and worse quality encoding engine in the apps mentioned above.
So do deinstall that orig software immediately and do get the cinergy 1.4 driver:
http://home.arcor.de/the.incredible/WDMDriver1_4.zip
Also do install the Directx9b patch so the system wont mess up your cards tuner anymore:
http://home.arcor.de/the.incredible/...16-x86-DEU.exe
Then if everything is well connected, you should try VirtualVCR again, as its a WDM Driver based capt. application.
Related to your Audio issue:
As you go in using a VCR as external tuner or Video signal providing device, you have to do the connection via a s-video cable to that card = better quality. The audio comes as 2 cinch cables out of the VCR which should be connected to a 2cinch-to-stereoMiniJack-adapter. Use that one to go into your mainboards Line-In (if the Capture card itself doesnt got an audio in). Then do setup the cards driver to s-Video in and also your system mixer has to be configured that line-in is activated and also choosed in the capt.appl. as audio in.