I have been converting some home movies from VHS to a digital format. I have been using a 2000-era Quasar 4-Head VCR connected to my capture card via RCA composite connection. When I compare the original tape coming off a Sony Hi8 over S-Video to the archived VHS of the same tape, I see more resolution, better picture in the original Sony Hi8 tape...not surprised. I think some of this resolution difference might be due to S-Video vs. composite connection. Of course, I am using the original Hi8 source when I can, but I cannot do that in all cases. Is it worth buying a VCR that has S-Video output? Since S-Video did not exist when the VHS tapes were copied, they would have been copied via a RCA composite connection best case. Therefore, the video source that I have probably has poor resolution to start out with. Is it worth tracking down a better VCR on craigslist for the S-Video output?
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The difference you are seeing is because Hi8 is much, much better than VHS, not because of S-Video. To prove this to yourself, connect the Hi8 via composite.
S-Video doesn't particularly improve resolution unless your capture device specifically lowpasses luma on its composite input. It was invented to reduce analog color encode/decode steps. If your tapes have some high resolution details, using S-Video should reduce the presence of luma-chroma interference artifacts called rainbowing and dot crawl.
Visually compare composite to S-Video here for example.