"Why Standard VHS VCRs Don't Have S-Video Connections
The reason that standard VHS VCRs don't have S-Video connections, is that it is felt by manufacturers that the extra cost really doesn't yield enough benefit to standard VHS playback or recording to make it worth it for the consumer, especially since basic S-VHS VCRs aren't that much more expensive nowadays."
http://hometheater.about.com/od/home...ideovssvhs.htm
In short: Cheap-assed manufacturers don't want to spend pennies to add the proper parts.
Now, I do remember seeing some S-Video VHS decks at Wal-Mart a while ago, but they wanted $80 for a VHS / DVD combo deck back then.