VC-500, excellent choice.
Sony player, better than many.
For lossless AVI, not many 64-bit consumer NLE programs, if any, can utilize lossless avi codecs, therefore I use 32bit anything, my choices are 32-bit PD, any version, or Stoik, a freeware.
Of course you must seek out and download lossless codecs such as Huffyuv, MagicYUV, Lagareth, UTvideo, and many others. I only use UTvideo as it has no issues within PD interface, I can utilize all the improvements and FX filters to repair the video, however, that may be specific to my setup, and you may be able to use other codecs.
Giving up 64 for 32 bit reduces the abilities of PD, that is why I capture with an old version installed as 32 bit, but edit in a newer version with full 64 bit.
Did your dongle come with PD? It might be a cut version, but still, if you click on the capture tab, choose AVI, and then click settings, you might find you already have the ability. Guessing.
This also allows for Divx capture, and actually, you can produce to Divx and lossless also.
Now, all that being said, I am not really an expert. I do very well when things go right, but real experts know how to fix when things go wrong! I am a little perplexed at your interlacing issue.
I suspect you are capturing MPEG2, from a ready-made PD profile, if staying with MPEG2, you should customize the profile to quality=7, check denoise, and bump up the capture to 12k. It defaults to interlaced, upper field first.
In my experience, with either MPEG2 or lossless AVI, I can tweak and produce a progressive file that plays fine. What software are you playing your files in?
Please note: The true experts are at DigitalFAQ, you can browse and search their forum, but they are Puritanical in their zeal to capture every last pixel, and mostly use scripting in VirtualDub to repair videos, I am not so pure.
HP Envy Phoenix/4thGen i7-4770(4@3.4GHz~turbo>3.9)
Nvidia GTX 960(4GB)/16GB DDR3/
Canon Vixia HV30/HF-M40/HF-M41/HF-G20/Olympus E-PL5.
Tape capture using 6 VCR, TBC-1000, Elite BVP4+, Sony D8 camcorder with TBC.
https://www.facebook.com/BarryAFTT