If you are taping from the pc to VHS it doesn't matter what video format is on the pc as its outputted from the TV out as raw video data but it may help if you select the correct format (PAL or NTFS). To play the files (on the pc) use something which will scale up (or shrink) the vids to the correct size and format ratio, Zoomplayer (just Google for Zoomplayer) is excellent for this.
As you probably know sound does not go down the TV-out it needs to be connected to you sound card. As said above the line out on the sound card will (probably) be a minijack but will need splitting into 2 seperate channels that your VCR will accept. You may well also need to play with the volume control within windows to get a signal to the correct 'volume' for the VCR to record the sound at the correct level.
A spliter (minijack to whatever) does what it says. A jackplug runs 2 channels (stereo) and needs splitting to single connections that other audio devices (ie a TV, video etc) can use as they don't accept jackplus. Take a look here and you will see what I mean.
http://www.starland.co.uk/pages/kia/a41.htm
The splitters are pretty cheap and I have a nice collection of (for the kids of course) videos taped from DivX's etc without any probs (video tapes are a lot more durable than CDR's DVD's etc).
HTH