Learn em all I say! Sort it out later...
Anyone who is proficient in programming shouldn't have a problem picking up a book (or website) and learning a new langauge, API, etc. in a weekend or two.
There have also been problems with the viability of format-conversion businesses, and many have closed their doors after having been paid by their customers and received their customers' tapes, and often because of property lease agreements and failure to maintain the lease, the business owner gets locked out and can't even get access to return customers' tapes even if he wants to.
Like anything else, people thought they could make a quick buck doing what seems to be an easy process. Most of these places just hooked up a cheapo VCR to a run of the mill DVD recorder and hit record. The results were awful, over compressed, and filled with video dropouts. To do it right requires time and money, something that isn't going to happen at $10 a tape. Doing it yourself properly requires significant investment in hardware and time to get the capture setup "just right". Even the DIYers (like myself) will tell you that its cheaper to send them out to a qualified transfer service. In my case, I didn't have much of a choice since a few of my tapes were in Betamax format, something many transfer places don't handle.
In your shoes I'd do it myself, and as others have said I'd probably not be quite so picky about quality as you're being. If anything, you should spend your money looking for a commercial-grade VCR or a high-end consumer one with good audio, like a fancier S-VHS deck, to make the playback aspect of the copy as good as it can be.
This question came up on Ask Slashdot a few months ago. I'll repeat the list here
Recommended VCRs for transfer: http://www.digitalfaq.com/foru... Budget: $200-300
Note: They are a a transfer service, they have first hand experience with these decks. You'll see that everyone else recommends the same decks too.
Recommended capture cards: http://www.digitalfaq.com/foru... Budget: $25-50
AGP ATI All-in-Wonder cards can be had for about $30-40 with the required dongles and breakout boxes on ebay. Look for a decent Prescott P4 with an AGP slot at the thrift store or scrapper for your capture box. The cards require Windows XP as there is no official support in Vista/7. If you want to capture on your Windows 7 rig, try and find the ATI TV Wonder HD 600 USB. It has working drivers, and captures clean video with no AGC issues.
External TBC: http://www.digitalfaq.com/foru... $150-200
Used to keep capture cards happy. Many capture devices are sensitive to unstable video signals found on VHS tapes and either completely drop frames, or falsely flag the video as having Macrovision.
You can optionally pick up things like a proc-amp ($150-200 for a decent one) for correcting video levels. For software, capture with VirtualDub. For compressing video to MPEG-2, one of the better commercial codecs is MainConcept, although most go with TMPGEnc or open source codecs (HC-Enc, etc.). For DVD mastering, the old ULead DVD Workshop 2.0 does a great job.
If your source tapes do not require special handling (water damage, mold, etc), these guys can handle it and the prices are reasonable: http://www.digitalfaq.com/serv...
They'll output to whatever format you specify, including the above codecs. Any decent place should. If the places you looked at are limited to DV, that is a sure sign they are using analog to firewire bridges. With HuffYUV, you can fit one hour of video in roughly 25GB. In the age of TB sized hard drives, that is nothing. So space shouldn't be an excuse, particularly if the customer sends in a blank external HD for the final product.