Based on what Pinnacle Studio 9 can do, it appears that Prescott is better than Northwood during AVI to MPEG2 renenders. If that translates into Premier, I cannot say. I use Pinnacle Liquid Edition, so am not current on what Premier can and cannot do.
For edification, the reasons for a second drive and a fast one are more than just capture. Yes, the drive mets capture requirements. But, if you are doing multiple effects and want to see the results in real-time, you have to read from multiple files. This is where speed will be key. That is why you will see recommendations for RAID0 or RAID5 configurations. What do the folks at the Premier site say? They work with it every day. As far as 120GB go, that was the size of my last, big project after I very carefully logged selected bits from the 20 tapes. It is not out of line to need more. But, with your "college" income, I can see why you want to hold off.
Other comments - Studio 9, while cool and having a lot to offer (I have it), is only a single track for video on the timeline. A real pain to do layered effects, which you can do using some to the techniques recommended by
Mike Shaw and
Allen.
VirtualDub is not robust enough, especially when comparing it to Premier. VD is more of a file editor than a composition tool.
If you are dropping frames during a 1394 capture, make sure you did not set the drive to support file compression. With compression on, the OS will try to compress the file as it gets written. This ends up causing a bottleneck at the cpu and frames get dropped (lots of frames get dropped).
Edited to change "capture" to compress.