iMovie compatible format

It will be obvious from my post that I'm a novice, but here goes. We have a library of VHS tapes that we wanted to transfer to DVD. I bought a used VHS/DVD recorder/player to do this, and it was fairly straightforward to dub from VHS to DVD. But, the raw videos are too long and choppy, so I'd like to do some basic editing in iMovie and then burn the edited version in iDVD. What I didn't know was that you can't import a DVD directly into iMovie, or at least not in the format I used. So, I guess I need an MPEG encoder to convert my DVD video into a format compatible with iMovie/iDVD. I'd appreciate any suggestions on software to do this, or on the process in general. I'd like to do it on the cheap (wouldn't we all) but know that may not be possible.

Thanks,
Doug