I have done lots of this.
Use the ADVC300 analog to digital converter.
I've played around with countless other conversion systems, ranging in price from $79 to $399. Short verison, this is the ONLY unit to own. No dropped frames at all, even with questionable quality tapes, no jitter, great color, excellent sound quality. Zero setup with iMovie 06 and iDVD 09 / 11.
This is a prosumer deck. The time code function is alone worth the price if you have old analog footage. Absolutely NO "Out Of Sync" audio.
ADVC300 is for anyone who wants to do editing and is concerned about quality of color and speed, for the novice it is an incredible gizmo that will restore VHS tapes to a state close to the original fixing midtones, highlights and shadows on the fly. Not only can you simply convert analog to digital you can actually manipulate the signal going in (if you want to).
A bit pricey, but it WORKS.
Use iMovie 06 with iDVD 09/11, why?
iMovie 11/09 uses 'single field processing' meaning every other horizontal line of the video is thrown out, which reduces the sharpness of the footage. iMovie 06 uses ALL of the image to form the video.
Your workflow is editing DV clips and making DVDs, iMovie '06 is better suited. Your movie will arrive at iDVD in DV format, which is an ideal match for making a DVD: same resolution, same pixels aspect ratio, and original quality.
If you share your movie from iMovie 11, it gets re-rendered at 640x480 or less, and then iDVD upscales it back to 720x480. The end result is obviously not as good.
iMovie 06 and iDVD 09 / 11 is a 100% "lossless" combination and my DVD's look like they came from Hollywood!