NRose8989:
If you transcode AVCHD or HDV to AIC or ProRes, it shouldn't significantly impact image quality. I would transcode to either one of those formats for your edit and then export out to a suitable format (like DVD, for example) when you're finished. That will yield the best results.
Even on an 8-core Mac Pro, transcoding is still a time consuming process that most certainly won't happen in real time. Not only is this CPU intensive, but hard disk intensive as well.
Most AVCHD camcorders record video at 13-15Mbps. In contrast, a typical HDV camcorder records at up to 25Mbps. Generally, higher bitrates yield higher quality video and this is certainly the case with AVCHD vs. HDV.
Now, let's explore tape-based media versus tapeless media, economically. A $3.00 MiniDV tape holds 60 minutes of HDV video. Assuming a 25Mbps bitrate (shooting in 1080i), that's about 11GB of data, which comes out to about $0.27/GB. This scenario gives you a hard tape master that will always be around in case of a hard disk failure. Now, let's say you want to keep a hard disk backup of tapeless media instead. A good, reliable (but still not invulnerable) Hitachi 1TB hard disk runs about $200, or $0.20/GB. So okay, tapes will cost $0.07 more per GB in this scenario, but will give you that hard master tape that will outlast ANY mechanical hard disk when properly handled and stored. Even double-layer DVDs are becoming relatively useless for HD media backup and high-quality, single-layer BD-R discs cost about $20 a piece ($0.80/GB).
Running out of hard disk space while you're on the go is just as frustrating as not having extra tapes, BTW. Would you rather go to the store and pick up additional MiniDV tapes for $3.00/each or by an entire hard disk in the same situation to get that 30-60 minutes of additional footage? I ALWAYS have extra tapes on hand because I never know when a shooting opportunity might present itself.
emperorbowsie:
There shouldn't be a problem using a G5 iMac for editing. Your render times with HD formats will of course, be slower on a single-chip G5 than they would on newer Intel machines, but it will still work.