So you are using MPGStreamclip to select the piece you want to rip, right? It sounds like you are ripping the whole thing.
Even if you are, you can do it that way - open the 9gb file in streamclip, and select the bit you want, re-save it as a (much) smaller file, then delete the 9gb. Lather, rinse, repeat, until you have all the clips, then import them into iMovie. When you have the mix right in that, select send to iDVD.
Honestly, your space is very tight with this amound. If you want to do this kind of thing, get an external hard drive with a boat-load of space - they're not expensive these days, and your worries will be over.