Hardware best. But it only stabilizes the as-shot footage.
To stabilize stable footage (meaning signal stable, content is not), then Mercalli is like magic. Avisynth and VirtualDub
methods are rudimentary, almost caveman-like in comparison.
If you want to see a sample of Mercalli in action, upload a clip for me. Leave it interlaced, a longer clip is preferred, as MPEG or H264 attachment. Not lossless for this example.