Assuming you mean the Canon MV 1 Mini DV camera that takes mini cassette tapes - AFAIK Canon never made a M series camera that recorded to mini DVDs ?
If you are using the S-Video cable to connect to the video grabber this is not the correct one to use, the cable with three cinch connectors and a single 3.5mm, 3 ring and tip plug should be used to connect to the Terratec video grabber then the audio will also be going through the grabber, which should be selected for both video and audio in Rescue your Video Tapes (RYVT).
If not please give more details on the Terratec eg model/colour, is camera audio working, which cables you are using and the settings for recording in RYVT.