[pawel]

If you want safe on space and retain quality then you should use H264 (x264) instead MPEG2. It compress at least twice better than MPEG2. Video of standard resolution encoded in H264 cannot be used for a DVD but is accepted by Blu-ray. You would need to encode to 720×480 59.94i or 720×576 50i. There is even better HEVC but it's simply an overkill for a VHS source, and it takes too looooong to encode.