1) Analogy: DVD camcorder is to good image quality as Windows is to security. (Not trying to bash Microsoft or anything, it just fit.)
2) Search this forum with the word(s): DVD, DVD camcorder, DVD and editing; you will find many negative comments.
3) Read the Camcorders Forum Sticky.
Now to your questions:
1) The two formats I think you are talking about are DVD-RW and DVD+RW. Similarities: Both are rewritable (Can be erased and written to again). Differences: -RW must be finalized in order to be played in a stand alone DVD player or a computer's DVD drive. +RW does nto need to be finalized in order to view on a stand alone DVD player. Some say it needs to be finalized for use in a computer's DVD drive, but I use +RW discs and do not need to finalize for the computer.
2) None. Especially the low-end DVD camcorders. The reasons? 1) High compression and 2) low quality and small sensor. If you want good image quality at the price you posted, stick with a miniDV camcorder.
Hello,
I'm fairly new to the world of camcorders and have just a couple questoins on the basics. First, what is the difference between DVD/RW and DVD/+RW? Second, what is a good Sony DVD (DCR) model under $500? I'm not looking for any specific feature, just good image quality and reliability. Thanks!

Chowhound
Comic Vine
GameFAQs
GameSpot
Giant Bomb
TechRepublic