File format probably isn't going to matter terribly much - normally I'd say "use FLAC!", but when source media is casette tapes and the contents are history recordings, I'd say MP3 is just fine. I'd still use at least 192kbps encoding though, and if space isn't a problem, I'd probably
still go FLAC even if it's overkill.
I have no idea how you'd go about recording the tapes onto your computer in a comfortable way, though. But I'd think that the best approach is to transfer an entire tape at a time (regardless of quality), and go do something else while it's happening (unless you have some fancy gear, it'll probably be 1:1 timewise) - skipping back and forth on old tapes to find interesting bits sound like a disaster waiting to happen.
Once you've gotten the tapes transferred over, the really important thing is left, though: finding an application that's comfortable for setting bookmarks, scanning back and forth, and is comfortable if you want to transcribe. You definitely do NOT want a standard run-of-the-mill audio editor (been there, done that - 30min interview took me 2½ hours to transcribe).
I think the software I was recommended by several friends was Scribe
, but I never got a chance to look at it.