This format is awful for trying to edit. The VR mode is really only useful if you are trying to edit in camera. I had purchased the Sony 505 dvd and it went back after 3 days as it took forever to try to work with the clips, so I know your frustration.
In order to edit, do not finalize your disk and don't use VR (I found it more difficult with this mode). The files are saved as MP4. You will need to use Sony software to get these files onto your computer. You will then need an MP4 editing software, often as in the case of quicktime, this is a seperate purchase for the codec.
Your mp4 is interlaced, you will need to convert it, I use the free mpegstreamclip (its decent and free) to get rid of you jagged lines. Also the sound is converted correctly when using this. Save your file from MP4 to DV stream. A DV stream you can edit. This takes some time depending on your clip. BTW, the mpegstreamclip will break the VOB files for you. Also VLC makes a player that you can watch individual VOB files and it also will export them to other formats.
Once you have edited your DV stream, and you are ready to place it back onto dvd. The content must be reconverted back with toast or whatever else you have so it can be placed back on to a DVD. This is a tedious and time consuming process, but saving to DVD from the get go is a problem if you want to edit.
Additionally there is a quality loss from the get go, and none of the DVD cameras can achieve the picture quality of tape. The number of bits per second recoreded by tape can be as much as 4-5 times more in the same period of time (in the case of the Sony HC1 and HC3). The quality loss from trying to edit from DVD is quite noticable because the necessary conversions from MP4 to DV (or whatever you want) and back again (another factor of compression).
I totally understand you difficulty, I went through it and went for a miniDV camera as it saved all of these intermediate steps. I also found I saved considerable time by taking the MP4's once downloaded on to my PC, I would shuttle them over to a mac (not using the Sony products) and editing things with Imovie was much easier, faster and produced a much more usable result then anything that I tried on the PC side (ie sony's included software and windows movie maker). I hope this helps