This may not be the right forum so please move/cross post.
Backgorund:
I wanted to preserve a LEGALLY bought VideoCD from 1994 on to DVD because:
A: I'm lazy and didn't want to get up to change the CD
and
B: I needed a backup anyway.

I tried many things including the guides here but the resulting file was always corrupt and a/v synch horrible.

I finally found something that works with mostly freeware:
Requires:
Software to create a VideoCD (!) image that is compatible with VCDGear (I used Nero 6.x.x.x)

VCDGear

DGIndex

Here's the exact workflow I used:
1. Created a VideoCD image using Nero 6 by creating a VideoCD project and selecting the file directly from the original VideoCD.
When setting up the project (compilation) it is important to stick as closely to the VideoCD standard as possible. That means no Joliet, no relaxed standards.
The original VideoCD had CD-i capabilities so those were replicated as well (set in the project settings). If the VCD doesn't have this I would probably skip it.
Nero has some standard, VCD-compliant files in the folders that can't be overwritten but that didn't seem to cause a problem.
Copy the AVSEQ01.dat file directly into the video file window. Nero will run some checks on it. This took a relatively long time (long than just copying the AVSEQ01.dat to the hard drive.

2. I started VCDGear (latest stable version).
Selected NRG -> MPEG. Activated Fix MPEG errors and Remove CD-i bumper.
Loaded the NRG image.
Selected ALL the tracks and out put the file.

3. I loaded the files into DGINdex (remember the whole point of this was to convert it to DVD so I didn't have get up and change the CDs).
Select Demux single track.
There was some grbage at the beginning of the file so I used the [ and ] selections to not encode them.

4. I converted the MPA audio to WAVE using Audacity and Voila! A perfect file for VirtualDub!

I know I could simple remux the file (after upmixing it to 48 Khz) but there was some garbage in the file plus a high-pitched "squelching" sound that I wanted to get rid of.

I know I won't improve the quality but by using lossless codecs I should not degrade it too much.

Hope this is slightly useful.