Hello Sagargv... First of all, dont ever transfer your movies through USB. USB is acutally mend to transfer only still images. Always transfer your movies through a Firewire card. Incase if you doont have a firewire card in your computer, you can easily avail one from the market. Its costs about Rs.600-700 and you should have a empty PCI slot in your computer to connect the firewire card.
As for your question, there are many softwares that will help you to convert your video directly to MPEG1 or MPEG2 format, but that is not recommended atall as it will degrade your picture quality like hell. What happens is that these softwares convert your movies with the inbuilt encoder of theirs, which is not that good. The best way is to always capture your movies in umcompressed AVI format and then do all editing (if you want to) in uncompressed format itself. Lastly convert the movie to MPEG1or MPEG2 usind a special software for this purpose. The best software available is CCE SP followed my TMPEG Encoder. CCE SP is the best and takes quite less time, but is for about Rs.1,00,000. So you can go got TMPEG. It is also very good, but quite slow. So you got to keep your patcience. Mind you, this software is also not free. In case of you are planning to go for a pirated version, you know what to do and which one to choose.
After converting your movies with any of these, you can safely delete the uncompressed file. But if you still insist to capture directly to MPEG format, use ULEAD Video Studio. Its the best I have come accross for both capturing and editing.
I hope this clears all your doubts. Incase if you still have any, contact me back...