I wrote up a User Tip on how to do this. You can find it here.
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 :
(unless you are running Lion in which case see below))
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.
And from the TOU of these forums:
Keep within the Law
- No material may be submitted that is intended to promote or commit an illegal act.
- Do not submit software or descriptions of processes that break or otherwise ‘work around’ digital rights management software or hardware. This includes conversations about ‘ripping’ DVDs or working around FairPlay software used on the iTunes Store.
If you are running Lion:
From the MPEG Streamclip homepage
The installer of the MPEG-2 Playback Component may refuse to install the component in Lion. Apple states the component is unnecessary in Lion onwards, however MPEG Streamclip still needs it. See this:
To install the component in Lion, please download MPEG Streamclip 1.9.3b7 beta above; inside the disk image you will find the Utility MPEG2 Component Lion: use it to install the MPEG-2 Playback Component in Lion. The original installer's disk image (QuickTimeMPEG2.dmg) is required.
The current versions of MPEG Streamclip cannot take advantage of the built-in MPEG-2 functionality of Lion. For MPEG-2 files you still need to install the QuickTime MPEG-2 Playback Component, which is not preinstalled in Lion. You don't have to install QuickTime 7.