Christine,
First, welcome to the forums.
The vHoldR captures in 640x480 XVid, so you need to set your timeline to match as closely as possible. Even then, it's going to be jerky until rendered as Liquid doesn't use MPEG-4 (which is what XVid is based on) as a native format.
Try this. Create a new sequence, and in the New Sequence dialog box turn on Advanced Mode (if not already on). Choose the NTSC 4x3 preset, and then change the Resolution to 640x480, interlacing to top field first, and Render/Fuse CODEC to MPEG-2 and click on the checkmark to make the sequence.
Drop your clip into that. You'll still see jerky playback because the frames have to be rendered on the fly. Either render the slice manually, or turn on Render Yellow Slices and allow it to render.
If I was doing this, I'd convert all of the clips to DV and then edit the DV clips. This will be a lot faster than trying to edit the Xvid.