Thank you for your insight. It does help to know that most people can't hear the difference on AC-3. My larger question was whether the loss that takes place will be a problem in the future. But I suppose nobody can really answer that. One time I got a new soundcard and half my sound files were corrupt on the new card because the old one was doing a slop job of encoding, but it would not recreate the problems on playback. With the quality of conversions available today, I suppose I won't have any significant problems in the future.
I wasn't planning on discussing the Video part of this, but I do have some points:
I must challenge you on your notion that your multi-pass encoding can be any better than CBR, on a level playing field. It is my understanding that -according to the DVD specs- the max bitrate is the max bitrate no matter whether you use VBR or CBR. So if your VBR max is 8000K, then any single GOP (Group of Pictures) cannot be any higher than 8000K, which the CBR at 8000K does at every GOP. Yes, the video may be fine at 6000K, but if a particular GOP needs to be encoded at 9200K, then your max bitrate setting will deny you that bandwitdh. You can't use more than your max on that GOP just because you used less in other GOPs.
In order to be consistent, your JPEG analogy should be comparing 5-pass compression against a single pass compression of 12 (out of 12). You aren't going to get any better than the max allowed by the format, no matter how many passes you do.
I still say the ONLY reason to use VBR is to save space.
Anyway, I am not capturing DV. I am getting this from VHS (VHS sucks, I know). I do have an ATI 9200 based card, and am using VirtualDub for the initial capture and filtering. I am able to capture 640x480 at 30 fps progressive - direct to HUFFYUV lossless with PCM while losing about 1 to 2 frames per hour. LOL, Maybe I will just leave everything uncompressed...at 23 Gigs per hour. With the future of data storage, this should not be a problem for long.
Anyway, then I am using the latest TMPGEnc for MPEG 2 encoding. It finally fully supports MPEG-2. But I will take a look at Cinemacraft. I had not seen that one first hand, yet.
At this point of the discussion, I am leaning toward using the AC-3 to gain the better consistency in the video.
Looking forward to your reply.
Kenneth