Those DVD Camcorders really need something like a giant sticker right on the store display camera and the boxes they come in that basically says: "Video editing not possible without deteriorating the video quality substantially". But they won't do that because they love to sell Sell SELL and they don't care how it's accomplished. They want your money first then they'll explain that you should have done your homework. But it's not your fault. Why wouldn't you think that. I was thinking the same thing about my Satellite TV. Now I have to convert it back to .avi and then back to mpeg again. It really doesn't look too bad, but it's the idea that it was in mpeg all along. I use to think the same thing and am only lucky the mpeg camcorders weren't common or available at the time. If you want to save yourself some headaches and be able to edit to your hearts content, get rid of the mpeg camcorder and get a firewire digital.
Or convert to .avi. If you have a decent A/D converter, it can look nearly as good as the original.