To edit footage properly it should be as uncompressed as it gets.
Divx/Xvid (
MPEG-4 codecs like
H264),
MPEG-2 and many other codecs are not suited for editing purposes. They are more meant for delivering video content, thus video DVDs use the MPEG-2 codec (which saves only every 15th frame by the way).
Also changing the suffix doesn't change a thing, and will most likely render the file more useless, as a file suffix only indicates the container formats (.mov, .avi, .mp4, ... are containers).
A video file uses codecs to encode the video data, which is encapsulated in a container.
So to properly get access to the video inside a file, the software you want to use, must be able to read the codec, and not just the suffix (container).
iMovie is meant for video editing, thus it needs data as uncompressed as it can, therefore it won't accept MPEG-2 encoded video easily.
In order for you to edit your videos stored on the video DVD, you need to rip it via
MacTheRipper / RipIt / Fairmount, if the video DVD is copy protected (all commercial video DVDs are).
If it is not copy protected, you might be just able to copy the Video_TS folder onto your HDD.
Now there are two ways to convert the MPEG-2 compressed footage.
1. Get
Handbrake and convert the footage to either an .avi file with the Xvid codec (2-pass or Constant Quality of 100% and highest bitrate for video and audio) or an .mp4/.m4v file with the H264 codec (the same as with Xvid).
Then use
MPEG Streamclip to convert/export the .avi or .mp4/.m4v file to a QuickTime (.mov - CMD+E) file encoded with the DV codec or to a DV file (CMD+OPTION/ALT+E).
Both, .mov and .dv, can be read by iMovie.
2. Get the
QuickTime MPEG-2 Playback Component from the Apple Online Store for 20USD, open MPEG Streamclip, in there go to File > Open DVD and select your Video_TS folder on your HDD.
Then either export it as QuickTime with the DV codec or as DV file as explained in step 1.
This saves you one encoding process, therefore time and image quality loss.
Btw, SD is short for Standard Definition, meaning the broadcast systems PAL and NTSC, which has a pixel resolution of 768/720/640 x 576/480.
HD is short for High Definition, the new fancy high resolutions like 720p or 1080i/p.
A video DVD stores its video in SD.
Have fun.
Screenshots:
MPEG Streamclip export options
Handbrake export as .mp4 - example