Neale has covered things very, very well. Thanks Neale!
There is one alternative, that you might want to tuck into the back of your mind. The DV-AVI Type II files are great, and so very easy to edit. They do, however, compress very slightly. Most footage will not show this compression, and all will be perfect, and easy. However, if you find that the compression is showing (it really should not), there is an alternative: the Lagarith Lossless CODEC might be even better. However, one must download and install it.Reboot. PrE will find it and offer it for MS AVI Export/Share. Many rely on this as their "intermediate, transport" CODEC. Lagarith Lossless is free. I would definitely stay with DV-AVI Type II w/ 48KHz 16-bit PCM/WAV Audio first, as it is great, and so very easy. Just keep Lagarith in the back of your mind.