Video quality should not be determined by the audio capture. Was MMC dropping frames because other software was running?
On the ATI card is a 3-pin AUX audio output. Inside the PC, on the card. A good audio card will have a 4-pin input, normally labeled AUX also, although it can vary, and there are a few (CD Audio, etc). Connect with that. The wire is may $1 and any PC store should have one.
The ATI card comes with two wiring bundles. One is black, about a foot long or less, and has SP/DIF and video output. On it is audio mini output. You can plug that back into a soundcard. I don't like that method, as I've seen it cause audio drift. I like internal wiring better. This is separate from the 3-foot long purple breakout box that has the RCA/composite/s-video inputs.
If MMC is not dropping frames, and you see quality issues, be sure you're following the guides on digitalFAQ.com and thne go ahead and raise the bitrate up a bit. Follow the bell-curve graphs for quality on the AVI vs MPEG page.
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