Welcome.
It seems you've done your research, and know what is what.
$2000 is a minimally decent budget for a full workflow that include
- S-VHS VCR with line TBC
- frame TBC(ish)
- quality capture card
I actually have a budget setup available, near that price, that I'll PM you about.
Don't mess with hardware upscaler. That won't end well for quality. Even software based is arguably not something most people should do. Only run an upscale for
additional copies, beyond the archived SD interlaced lossless copy. Upscaling won't really do anything for home viewing, but it is needed for NLE work, such as editing Youtube videos in HD.
H.264 (in MP4 container) for viewing, and likely QTGMC deinterlaced, is fine. But for the actual archival copies, keep as interlaced, and lossless is ideal. If not lossless, then lesser-compressed, such as high bitrate MPEG-2 (preferably @4:2:2), or high bitrate H.264 @ 4:2:2. This is because H.264 is not the best compression, it can be mushy quality. MPEG went to blocks, H.264 goes to mush. Future compressions will be better, and you'll want the archival less-compressed or lossless files at that future date.
Also, MP4 isn't a good home/offline container, MKV is better. MP4 is really a legacy container now, mostly used for online streaming. MKV is vastly easier to work with, in terms of audio streams (and subtitles).