No, no. The LD is encoded at 29.97. However, the material is filmed based, which means it started as 24 fps. 2-3 pulldown was used to create the 29.97 LD transfer, so you want to reverse this. LD players have to play at 29.97 (or 25 fps for PAL), but DVD players can do pulldown with 24fps sources. Since you will have fewer frames to encode, there's less work and more space.
"Lossless quality (roughly 300+k per frame)"
Do you know which codec you will use? HuffyUV has been great for me (thanks again, laserman.
)"Will try s-video & composite to determine best quality (I have noticed everyone saying composite is better)"
Again, it depends on your player and capture board, but chances are your board is better, so composite is the best bet (unless you have one of the few, rare top-end players.)
"I have an optical in & rca ins.
Once captured does the audio maintain it's surround features or is there somthing extra that needs doing?"
No, then it's up to your receiver to create the surround channels from the stereo soundtrack.
When I was using my camcorder with fire-wire pass-through capture, I was able to sync up my audio and video no problem. Now with a separate board, I've yet to figure out how to sync them up. Luckily, Sony Vegas lets me cut and paste wherever I want, so it's easy to line up my video and audio from separate captures. Also, when I capture video and audio separately, there's less CPU overhead, so I won't drop frames while capturing video. This is important, because if you drop a frame, it will ruin the IVTC process (or, at the very least, force you to do it manually, which is a slow pain-in-the-ass.).