Archiving 8mm Video

I have a box of Video8 cassettes with various home videos on them. Not having seen any 8mm camcorder in some years, I decided I had better back these tapes up before there are no devices left to play the tapes.

The best way to back the tapes up is to use a Digital8 camcorder and capture via Firewire. The perfectionists will recommend using dedicated tape decks, but these are very expensive and the Sony ones break down quickly.

I borrowed a Video8 camcorder with composite outs (a yellow RCA jack and a red RCA audio jack). I have a Hauppage WinTV card from the late 90s which can capture video. I connected the audio to my PreSonus Firepod. I disabled all other sound devices on the PC via the BIOS since Windows likes to randomly choose which device is active.

I followed the tutorial at this location: http://arstechnica.com/guides/tweaks/vidcap.ars

Briefly, NTSC 8mm resolution is at a minimum 352x288. That's only marginally useful information because your camcorder may have done better than that. I went with capturing at 640x480. I downloaded VirtuaDUB+VCR. I first started capturing with HuffyUV using YUY2 colorspace, but while HuffyUV is great because it can do lossless 2:1 compression, that's still a whole lot of data and I realized that even with 1 terabyte of storage, I would likely run out of space.
So I switched over to the lossy MJPEG encoder for some 8:1 compression. The quality of the tape from 1992 is not exactly stellar and MJPEG does a good job of capturing it all. I found I had to check each video afterwards to see if the audio stays in sync. About 1 in 5 captures would lose sync.
The only remaining issue is deinterlacing. I started reading about how to do it properly, and my head began to spin. It would be preferable to deinterlace BEFORE doing lossy encoding, since adding deinterlacing later would cause yet more lossy compression, introducing more generation loss.