Capturing VHS tapes - DV codec isn't cutting it - What are more efficient alternatives?

[salils]

I have some old VHS and 8mm video tapes that have a good deal of grain and static. When I capture them using a digital 8 camcorder's FireWire analog to digital pass-through function, there's a noticeable amount of macro blocking visible due to the large amount of grain in the original analog video source. My plan was to capture everything in DV and then convert it to h.264 but the DV codec doesn't seem to be efficient enough/high enough bitrate.

What are the alternatives to DV? I'd like to spend less than $1,000 if possible and preferably Mac OS X Yosemite compatible, though, Windows and previous versions of OS X are an option, if necessary.

Current hardware: 2013 Macbok air w/FireWire 800/400 adapter and a 2008 MacBook pro 2.4ghz c2d (pre-unibody)

 

[popatim]

I did mine on a vcr/dvd combo. I'm not sure if they make those anymore though.

 

[salils]

I've tried a couple of DVD/VCR combos but the quality is pretty bad in my experience (even worse than 25 Mb/s DV) because of the MPEG-2 codec used in order to write to DVD video.