Use firewire if you can. It is really stable. you can hook up your external drive and the video recorder and the external burner in a chain.
You will also need software. There is a patch called HPFurz that will allow the use of iDVD on an external drive, but that's with OSX. Toast is a great program, but Toast five will not render a video DVD (TSVideo file) but it will burn a video DVD if you have the rendered file. Apparently, Toast 6 will do all of this, and if cost is not a problem, I would get it.
Software is a nontrivial issue. It is no accident that your PC using friends don't turn out videos. They may turn out one, but never again. That so-called-crappy iMovie, really succeeds at simplifying things, but I have not used the old OS9 iMovie so I don't know how it works.
I would guess that rendering a video DVD on a 300mhz iBook would take overnight---but that's OK. The real issue will be disk space and RAM.
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