Set me straight on capture format and burning to DVD

[backert1]

Hello,

I have read many of the posts and the guide "From Camcorder to DVD with Videostudio but I have a few questions I need to get straight.

First my situation. I have many hours of VHS and Hi8 analog video I would like to 1) archive to safer media, 2) burn to DVD as complete files for quick easy play on TV, and 3) edit into movies and save on DVD.

My capture equipment:
Sony Viao
2GHz P4
2M memory
3 HD's (200G, 200G, 500G)
ADS Pyro-550 rev E external capture box IEEE-1394
Videostudio 9

Problem:
I have captured all of the analog tape played through the ADS box to MPEG 2 format as recommended by the VS support tech (using the VS default settings of constant rate 1800bps) . The files are ~ 0.9GB per hour of video. I used VS to burn the files to DVD for play on TV. The video quality is much poorer than either the VHS or Hi8 tapes - rolling "heat waves", general blurriness, and pixelization around any moving object. Even the image displayed in VS during capture shows these same issues but much is hidden due to the much smaller screen. VS techs blamed the capture box. ADS had me try it with windows movie maker and Adobe 3.0 elements in DV capture mode - picture quality as good as tape. Repeated in VS with DV capture mode (type 1) - same results. ADS box good as gold. So the problem becomes filesize - 13GB per hour. VS chokes on trying to burn the 1 hour DV file to a 4.7GB DVD. I thought the DVD burn process compressed the video to fit 1-2 hours on a DVD in MPEG2?

Questions:
What is the best way to solve the following issues;
1) If I want to edit - I understand the best way is using native DV format. How does one manage 60+ hours and growing of DV video online and available for editing at any time? Is there any way to work with a more compact version of the file and not confront the sacrifices of pre-conversion to MPEG2?
2) For archival I was planning on using DVD's. I would also like to be able to pass copies of this unedited video to our kids for thier later use. Seems like re-importing a DVD MPEG file will be poor quality for them to watch or edit later on thier own. Is the real answer to update to the mini DV tape and backup the original tapes directly?
3) For "pleasure" watching of the unedited tapes on a more friendly format the presently burned DVDs are unacceptable. Is there a better way (format) either import or burn to DVD for this purpose? Convert files to MPEG after DV import? Use a higher bit rate (8000bps variable) than the VS tech suggested? What product does one use for conversion or burning if not VS?
4) I am looking to purchase a digital camcorder. From what I hear the DVD, mini DVD, and hard disk formats are really not suitable if you intend to edit the video and the recommndations is to go with Mini DV tape. Is this really the right answer? We are simply average home video users - no pro level question here.