Hi @walt, I know this is an old thread but replying here for the benefit of other users who search to solve a similar issue.
Also Hushpower's reply does not solve the issue, at least with Hauppauge Live 2 USB.
So... I faced the same problem as you: if I start capturing in
VirtualDub then press Play on my VHS player, all I will record is a a black frame. My workaround: press > (play) on the VHS player first, wait for the video to display in
VirtualDub, start capture in VirtualDub, press << (fast backwards) on the VHS player until you reach 00:00:00, then press > (play) - all of that while VirtualDub still capturing. Once you have captured the full tape, trim the beginning and losslessly save as avi with both video and audio set to direct stream copy.