I'm in the same mess. I've recently learned a great deal about the process, but still am having problems. Basically, you must capture the video in AVI format to your harddrive using firewire, create chapter points for the DVD menue, do any editing (which I don't), render/convert/compress to mpeg-2 format, and burn the DVD. You can either do these things separately with different software for each, or use software that does it all for you, like Sonic MyDVD 4.5's Direct to DVD option.
With the Sonic MyDVD 4.5's Direct-to-DVD option, you create the chapter points for the DVD menue, during the capture process, by hitting the spacebar. The results are nice & it takes about two hours. However about 1/4 of the time I run into an error/glitch, which causes the whole process to be a waste of time. I think the problem occurs with miniDV tapes that I'd removed from the camcorder & then put back in for one reason or another, because it's often that point in the tape that has the problem. Another problem I've had with the direct-to-DVD process is that it doesn't quite fit an hour of MiniDV onto one DVD (you lose about 3 minutes of footage), so I have to remember not to use the full hour of miniDV tape. Also, I'm not sure if it compresses it to mpeg-2 or some other format, and I don't think it stores the file anywhere on your harddrive, so you can't find it to solve the errors. You have no control over this.
So I've recently tried to convert the video by using Ulead Video Studeo 5.0 DV to capture it to my harddrive in AVI format, and then used Sonic MyDVD to render/convert/compress it to mpeg-2 and burn the DVD. This takes about four hours. This way I can store a copy of the uncompressed AVI version on my harddrive & it creates a separate mpeg-2 file before burning. However I can't figure out how to create chapter points for my DVD menue & I sometimes still run into rendering/burning errors that I haven't been able to solve.
If anyone has the time to provide me some detailed help, it would be greatly appreciated. I'm leaning toward the direct-to-DVD method because it's quicker & creates nice motion-chapter-point menues on my finished DVD. However I want it to also provide me with an AVI version for permanent storage on my hardrive, & I want to be sure the final DVD version is in mpeg-2 format. Does Sonic MyDVD direct-to-DVD store an uncompressed AVI version somewhere on my hardrive? Also, how can I solve the error/glitch problem that I described above? Or can you suggest a different/better direct-to-DVD software for me. I'm not interested in editing, other than creating the DVD menue chapter points. I'm using a Sony DCR-HC85 MiniDV camcorder, Dell Dimension 8300 computer, 2.66GHz processor, 512MB DDRSD RAM, 4x DVD+RW/+RW/CD-RW drive, Windows XP, firewire card, etc.