Kinda like the good ol' days where you had two tape-recorders setup to make duplicates of your home-made VHS tapes.....play on one, then have the other that's connected to it record the video/audio signal it's sending along the way to the TV......
Yes, exactly like that.
and such a system would require compressing the video/audio on the fly though, would be a bit rough on the "average joe's" computer when talking of an average DVD quality video no?
I dunno, perhaps. I can do it with a £30 DVD player and a £65 DVD recorder, so you would think my £800 PC could cope with it, but perhaps not. I just figured some clever programmer would have come up with a way of doing it like the standalone players do it, intercepting the image as it's being played rather than decoding, reencoding and burning data from and to the disks. But maybe it's not even possible.