I do have a average machine can do HD editing but dont want to waste time.
i7 860 not overclocked
16 Gb 1333 Corsair Dominator
Corsair 950tx PSU
Asus Maximus iii P55 Motherboard
Looks to me like your 2nd line of your 1st message is the answer you already want... convert before editing
I'd work with the native media and create the DVD form that. Your system should handle it fine.
I second that. Edit in avchd and export to mpeg2-dvd or use Dynamic Link.