I haven't actually used vb:each before, but I think you'd want this:
Code:
<td><select name="cGID" size="1">
<vb:each from="var1" value="chan">
<option value="{vb:raw chan}">{vb:raw chan}</option>
</vb:each>
</select></td>
Of course as an alternative, you could do this:
Code:
$menu = '<select name="cGID" size="1">';
$chan = mysql_query("SELECT * FROM channels ORDER BY chan ASC", $connection);
while ($list = mysql_fetch_array($chan))
$menu .= '<option value="' . $list['chan1'] . '">' . $list['chan1'] . '</option>';
$menu .= '</select>';
$templater-register('menu', $menu);
<td>{vb:raw menu}</td>