Should I continue developing my site further or keep a simple landing page with email capture to test my idea?

Depends on your objective.

If you really just want to know whether the idea is viable, you'll get the most bang for your buck by keeping things email-capture-only or putting up a "smoke test" where you have a Buy Now button that redirects to a "it's not available yet; but leave your email if you want to be notified when it's ready"... and see if you can get anyone to click "buy now" by clearly articulating on your landing page what the product will do for them. This also lets you test pricing sensitivity.

If you can't get anyone to leave an email or click "buy now" based on a really good description with images (or even better a video "demo") then building the actual product is unlikely to be worth it.

I have worked with startups for more than 15 years, mostly as a seed stage (pre revenue) VC.

More and more, funders and other stakeholders look towards third party proof points (e.g. users). If you can build a mock up or MVP great, but even a simple landing page with EOI proves that what you are working on may have legs.

Better to test, early and often is what the Lean Startup teaches us. Once you have proven something, only then move on, invest more, and build out. First search for problem/solution fit, then product / market fit, then scale.

If you'd like to discuss, drop me a follow up note and I can share more thoughts and resources.

capture the "intention" first and once you gauge the real interest continue building.

Use google forms to set up leads or interest, probably the best way to do it
http://www.google.com/forms/about/

Instead of building the product first, try and see if you could use some existing service to test our your market. For e.g. you could start a Facebook Group, or a mailing list to run things manually for a while. Get the user engagement, get a lot of feedback. And once you have enough material to work on, build the product.

In other words, get to market without building a product if you can. It's always easier to get some traction on existing (social networking and other) sites than a new standalone site.

1.Build the LP - converts?- If yes, move to step 2. If not, keep changing the traffic sources, message, style, features, product till something makes it convert. When it works, move to step 2.
2. Build the website like you have built the product but you haven't - If it converts build the product. If it doesn't, try step 3
3. Build a demo, simple video, all the stuff to show how your product works though you are yet to build the product - still doesn't convert? - Chuck it or pivot. If it works, build the product.