I would still try the modulator first. Just feed the audio and video from the DVD into it, and connect the output to the coax to the TV, or if you want to use it for recording, too, connect the modulator output to the VCR coax input, and leave the VCR coax output as it is now.
(I haven't tried the video stabilizer, but if you or anyone else has, I'd be interested in knowing if it works, and if the video loses any quality.)
If your VCR happens to have a 'simulcast' option, where the audio and video inputs can be separate, you can feed the stereo audio from the DVD directly to the VCR's audio inputs (assuming a hi-fi VCR) as you would using a stabilizer, and the video through the coax input from the modulator, thus bypassing the MacroVision problem. This way, your recording will have stereo audio.
Larry
www.fineelectricco.com