Once recorded in DV format, the video is already compressed about 5:1 and a certain amount of its color information is thrown away (4:1:1 color). But capturing through FireWire does not compress it more. In fact, it allows you to digitally capture that DV video exactly as it was recorded without any loss. You can’t get any better than that.
Whatever you do, don’t capture from composite or S-Video. Your result can only be much worse than a FireWire capture.
The reason to capture via SDI is that it allows you to capture directly into a codec other than DV–uncompressed 8 or 10-bit with 4:2:2 color, or ProRes 422, for example. The advantage of this is clearly that your effects, color correction, graphics, and titles–anything that requires rendering–will benefit from less compression and more color information. Generation loss is also minimized in this scenario, so anything that requires multiple passes of rendering will be improved.
So, if you don’t have an SDI output and a capture card to accept it, what do you do to get the benefits listed above? A typical method is to capture and edit your project in DV, but once it’s complete, duplicate your sequence and then change the video compressor in the sequence settings to uncompressed 8 or 10-bit or DVCPro50 or ProRes. All of your DV clips in the timeline will now have to be rendered, but, voila, your graphics and effects will look much better in the higher quality codec. There are many variations on this concept that are suited to different types of projects–depending on the type of footage that it includes, the amount of graphics and effects, the final output, etc., etc.
Look for more information by searching the Cow (and Google) for articles about generation loss, ProRes 422, SDI, “going native” and anything else you can think of to search on. I believe Ken Stone has the “When to Go Native” article.