Your biggest hurdle is that you are dealing with a wrong format. the files are probally either Mpg2 or mpg4. Both are bad for editing footage. As you found out, you need to convert to DV format. That part isn't to hard there are a number of ways to do the transcode. The reason the DV format looks so bad is that the camera is shooting the video at a very small resolution 16x120 or 320x240 something like that. So when you convert to DV you get an image that is blowen up to 720x480 ( the size of DV video), Just won't look good. Same basic principal as Digital zoom you are just making the pixels bigger