We're all in this together... at different stages...
The Sony DCR-SX85 is a standard definition video, flash memory based, camcorder. And it is good to have some details on your computer.
Since the camcorder does not capture high definition video, there is little need for a Blu Ray recorder or player. Personally, I see little need for a Blu Ray recorder or player even with a high definition camcorder, but that may be just me. Assuming your computer has the CPU, RAM and available hard drive space to deal with the video files, you *could* just use the computer as the video source connected to a TV...
Any camcorder can record decent video when there is enough light. The issue is no one tells us how much "enough" is for any specific camera. A couple of tips: (1) use a tripod or monopod or a rock, chair, table, anything but not handheld. (2) best light is outdoors on a sunny day. Experiment. It may sound odd, but adding light is relatively easy, though not exactly "comfortable" or practical. A worklight or two on tripods in your living room is not exactly inviting, but will be an interesting video quality improvement. (3) Record at highest quality. You can always downgrade - but upgrading (upsampling) is not possible.
Your XP system (assuming there is enough RAM and the CPU is decent) may be enough. As I recall, the DCR-SX85 records to MPG file type. Not many video editors can deal with this. Transcoding - converting - the MPG file to something your video editor can deal with is easy enough. I like MPEG StreamClip from www.squared5.com and HandBrake from www.handbrake.fr . Basically, convert the MPG files to WMV (that is what MovieMaker likes - it was part of Windows XP SP2 and newer). Edit, add titles, transitions, etc. When done, "Share" or export the final project out to high quality WMV. Using a DVD authoring tool (like MyDVD), bring that final rendered project in, set up scene selections, background images, audio, etc... then burn the DVD. The resulting DVD can be played back in pretty much any DVD player in North America.
The upside is that you can treat the high definition video pretty much the same way - the file types are MTS or TOD, transcode to WMV, place in MovieMaker, edit, save, export/share, bring into DVD authoring tool, burn the disc. The resulting VOB files on the DVD will be standard def video playable in a regular DVD player.
After several years of this sort of thing, I now do all my editing on Apple Macintosh computers using FinalCut, iDVD and DVD Studio. I learned about lighting the hard way - same with using some sort of steadying device. I can't see what you see, so it is a bit challenging to understand what your results are - and their cause. I use -R single layer and +R double layer DVD blanks.
Basically, I watched the pro news crews work with their big cameras and learned that the large lenses and large imaging chips are what allow for good lowlight video capture behavior. We can't afford those camcorders, but we can add light. And they are always either shoulder mounted or on a tripod (and you see more using vest systems with articulated, counterbalanced arms like the SteadyCam systems).
All camcorders (including high definition camcorders) have an AV-out. This is a composite video (yellow RCA plug) along with the left/right audio plugs. So high definition camcorders can indeed plug into your VCR. The resulting recording will be downsampled standard definition video (and analog).
I *think* the changing colors may have something to do with the indoor lighting and the white balance option in the camcorder. Like I said, add light... and rather than allow the white balance to be auto, select the appropriate preset in the camcorder's options. You *should* be able to set the white balance manually, too. But the presets are generally good enough.
No apologies necessary. I hope this helps.