You need to convert the VOB files in the TS-Folder of the DVD back to DV which iMovie is designed to handle. For that you need mpegStreamclip:
which is free, but you must also have the Apple mpeg2 plugin :
which is a mere $20.
Another possibility is to use DVDxDV:
which costs $25.
For the benefit of others who may read this thread:
Obviously the foregoing only applies to DVDs you have made yourself, or other home-made DVDs that have been given to you. It will NOT work on copy-protected commercial DVDs, which in any case would be illegal.