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You are going from one compressed source to a compressed output so the quality will never be pristine, especially if the DVDs themselves don't look so great to start with. You might be able to just rename the .VOB files to .MPEG as I recall that is a trick that worked for me in the past. And then experiment with different apps to see which will accept those MPEGs as an input and which can convert to WMV the best.
Otherwise, going from VOB to AVI will usually work pretty well and then compress to WMV with the best settings possible in Windows Media Encoder, VideoCharge or other apps. The outputs should look pretty good at 320 x 240 and shouldn't look too bad at 640 x 480 if the source is decent.
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