Really, that's wrong. Look, I think we're both out of our element here as the laws and judgments are contradictory many times (fair-use is legal but the means by which to create a fair-use copy are not?), and this will be the last I say on the matter (as once again, I'm admitting that I'm quickly getting out of my depth), but an argument based on copy-quality is just wrong.
What it all boils down to is the breaking of copy protection as described in the DMCA. VCR is legal because of fair use statues described in the link I provided in post 22. Those statutes were effectively thrown out the door with the introduction of the DMCA and digital encryption. As I understand, it was still illegal to create devices to macrovision copy protection in VHS, despite the quality degradation.
DVD recording through the analog hole is legal not because of quality, but because it does not break any copy protection. And even then, "legal" is fuzzy depending upon who you ask, where you got the original source material, and what you do with it.
Not distributing is a primary tenant of not getting caught, but not of legality. The RIAA had been hard at work as early as last year trying to make it illegal to copy a CD/DVD you own for your own personal use (Atlantic vs. Howell) irregardless of distribution. Fortunately, though the case was found in favor of the plaintiffs, it was on the basis of default judgment for Howells destruction of evidence as opposed to affirmation of Atlantic's claims. Moral of the story, though Howell got caught because he copied and distributed, those copies were not at the core of the charges, the making available/distributing was. (Edited for clarity)
You can make ISO copies of non CSS dvds for your own use, not post or distribute, and they will be legal. Cracking CSS is what get's you into trouble, and everything I've read makes it unclear of the use of tools to crack CSS is illegal, or simply the creation of those tools. I would love to see a court case that shows a judgment against the simple use of CSS cracking tools.
Would following all 3 of your tenant constitute creating a legal copy: Recording a DVD via s-video to a VHS recorder and not distributing it to anyone? I'd have to read the DMCA more closely but yes, I think it would. However, that has everything to do with digital copy-protection and nothing to do with the quality of the copy. I could capture video via component, reauthor that video into a DVD menu structure, and have a copy with negligible quality loss that would be no more legal/illegal than the s-video VHS example.
The moral of the story is that, depending on who you ask and what the courts do in the coming years, any copy of any copyrighted work for any use could potentially be illegal under the current laws. Informing yourself in the hopes of finding "legal" ways to create copies is an exercise in futility.
Once again, IMHO, if you really want copyright reform, educate everyone around you at the benefits of fair use copies, show them the application in media servers and portable entertainment, show them the cost savings of not having to replace damaged discs, and get the majority of people on board. Then, when a fair-use throttling case make illegal what a vast majority of the poeple are doing, you will see a ground swell that creates meaningful change, copyright reform, and the demise of the DMCA.
BTW, for any RIAA/MPAA snoops, feel free to email me. I will literally have you over for a beer, you can look through my collection, and we can talk about this like civil adults.