"Editing images while the DVD (or MemoryStick) is still in-camcorder is not actually possible with all video modes and formats. In fact, full editing of images or video clips is only accomplishable when the camcorder is set to shoot in VR mode and the footage is recorded to DVD-RW format. If shot on any other disc format or while the camcorder is in video mode, the user must import footage into another postproduction editing program."
from http://www.camcorderinfo.com/content/Sony-DCR-DVD405-Camcorder-Review.htm

For most this is a surprise that not only postproduction editing may be difficult but also impossible. This alone is a reason to not consider this model.

"The DVD405 does not have an external mic jack."

There goes the analog mic audio input.

"Since the A/V port is capable of supporting both in and outward video and audio signals, the user can engage in analog to digital pass-through."

Bingo. Your are right (if this is the right model.)

Still no sale here.