My (small) organization currently has a training program that is
conducted partly by PowerPoint© presentation and partly from VHS.  To
avoid having to connect both a VCR and a laptop to the projector, we
would like to convert, if possible, the VHS tape to a digital format. 
An .mpg format would intregate directly into the PowerPoint© (during
our training we switch from the PowerPoint© to the tape and back again
a couple of times) - but I'm concerned an .mpg format is going to be
too large of a file.  We project on a medium screen (usually 5' x 5'),
and would like to retain the video size and quality, i.e., we do not
want to have our PowerPoint© presentation take up the full screen, and
then show a video clip ½ or ¼ the size - nor show the video full size
but at a poor pixel quality.

The VHS portion of the training is about 60 minutes.  What solutions
should we examine to convert this to an integrated presentation?  Is a
converted file going to be too big?  What is a typical (or average)
cost of professionally converting the video (we don not have the
in-house equipment or expertise) to digital?  Should we look at
converting both the PowerPoint© and the VHS to DVD?  What is the
average cost of doing that?  What would you recommend?

Let me know if I can clarify anything!

A great answer will earn a $3.00 tip.

.mpg (mpeg 1 to be specific, mpeg2 is dvd and is larger) files are
typically (and max out) at 352x240 resolution, or about half the
resolution of a standard tv screen. Though this is not perfect, it mpg
encoded video is roughly equivalent in quality (in my experience) to
VHS video (sometimes a little less, sometimes a little more). The
advantage of standard mpg is that it will play on lower performing
computers such as laptops (especially ones that are not state of the
art) with far fewer hiccups than would dvd video or divx.

mpg formatted video is typically 10 megabytes per minute, and this
would make your training video about 600 megs, about the right size to
fit on a recordable cd.

If you already have a computer, there are a variety of video capture
devices that should be able to convert directly to mpg format that
cost less than $100.

I wish you the best of luck and hope another researcher can fill in
the details for you.

Here is a lot more information that could probably help you to get it done.

Here is a lot more information that could help you out:

http://club.cdfreaks.com/showthread.php?s=&threadid=80651