First of all you have got the right equipment for the job - exactly the same as mine, and I had 60+ hours worth to convert!
Make sure that playback from the VHS is as good as it can get: clean the heads, and run the tapes on fast forward/rewind to remove any 'stickyness' before you start to copy.
Make sure you have enough spare capacity on your hard disk. DV streams run at 13GB per hour, and iMovie uses a lot of swap files. Don't even start this unless you a minimum of 25GB free!
If your VHS has an S-video output socket, well and good, as not many have. That only covers the video, so you will still need the RCA cables (white and red) for the audio.
The Canopus does of course have to be connected to your Mac by firewire.
1. That distortion is the timeline on the VHS video, which you never see on your TV. Once you have it all on DVD you probably won't see it on your TV either. iMovie reveals more of the actual video frame than a TV does.
2. Save the imported video in 5 minute clips, or your project file will bloat as you start editing. The clips (video) are stored within the iMovie project folder, the one in your Movies Folder with a star on it. When you come to editing SAVE THE PROJECT OFTEN - every two or three edits.
3. When you have finished editing (and try to keep each project to under 90 minutes, although 60 minutes will give the best quality) save the project and close iMovie. Open iDVD and start a new project. From the File menu in iDVD choose Import/Video. That opens the Movie Folder and you can select the project you want to work on.
When you have done what you want to do in iDVD (Theme, Titles, Chapters, Transitions etc) save the project, then 'save as Disk Image'. Why? Because rendering the video, particularly the audio, takes ages, and you only want to do it once. You can actually burn to a DVD from the disk image, so if you want more than one copy you don't have to wait for it to render each time. Also, you can play the disk image in DVD Player to check everything is OK and therefore not waste a DVD.
Post back with your next set of questions - if you are new to this there will be more!
Personal advice: experiment with a short 15-30 minute project, just to get the hang of it and build up a workflow you are comfortable with, then just go for it! 🙂