I have used the headphone - microphone jack trick for edits I've done in the past. It's quite effective.
Also from the website of James Rolfe:
How do you record your game footage?
I just use a DVD recorder. That’s it. The game is plugged into the DVD recorder, and I push record. It’s that simple. But then, how you get the DVD footage into your computer is up to you. There’s several ways, but I run the DVD recorder into a digital camera which converts the analog signal to digital and captures into Final Cut Pro using a firewire connection. This means having to record it again, in real time, usually when I’m away from the computer doing something else. Doing it this way, rather than some kind of DVD burning software, allows me to capture it in Final Cut’s native codec, without the hassle of rendering constantly and having various tech issues.
His advice is for using a mac though--For you, I'd suggest going as far as recording it to the DVD recorder, then ripping the footage with one of the many ripping tools available online, then using whatever movie editor you have to edit the footage. Not -quite- as pretty looking but it saves you some steps and some hardware and software you may not have.
Of course this method is hardly easy, but the final product comes out very nice. If you don't mind your video looking like Youtube garbage you can find easier ways around it all I'm sure.
