For the things you plan on doing, the Canon S100 is fine. Software wise, I'd suggest iMovie 11. Don't make your life overly complicated.
Those Sony harddrive cams are known to be a #$%& with Macs, but when you check the Apple support forums the might be able to help you.
Grainy footage: Not enough light in the scene.
You lines in the footage come from interlaced footage. You can solve that by exporting as progressive (AFAIK, iMovie does it automatically).
Thanks for the suggestions. I'm looking at the Canon HFS30 vs the HFM41...not sure which way to go. Even though it's just footage of kids, I'm a perfectionist and I want it to be crisp.
I have spent a lot of time on the Apple Support forums as well as on the phone with mac and honestly I get so many conflicting answers it's hard to know what to think. I've been told to abandon the Sony b/c of the interlaced footage.
Are you talking about exporting through mpeg streamclip? If so, been there done that and the footage is still grainy. Tolerable on the TV once the DVD is made, but horrible on the computer. Footage looks great on my PC so I know it's the process of deinterlacing that is causing it. If it is not deinterlaced, there is no audio in imovie. I'm not willing to spend one more second trying to get the sony to work - I'm only willing to buy new programs or a new camera and start this process over. I have saved all of my files from the camera so thank goodness I still have the originals and can import into a new program. I'm thinking the Canons I listed above with Adobe premiere elmenets 10?