I'm looking to use an old mac we have (G4 800 w/1gig ram) to digitize ,not edit video, for DVD. Now my understanding is that I need to install a FW800 Card so I can use our extral Lacie as a Scratch disk. Do I need 2 of these cards so the io can have it's own bandwidth? Also, will this setup even work for capturing GOOD video for DVD projects?
You'll only need a single FW800 card for the external HD. The internal bus will handle the Io.
There is no reason why it won't capture the same quality video as a brand new 8-Core MacPro. The MPEG2 encodes are going to be considerably slower, but capturing uncompressed SD is going to give you the same quality regardless of the machine you choose.
The only problem I see with the setup is that it is technically less than the minimum required spec (which calls for a Dual 800 G4).