As I said in my response to your other thread, there is always a re-compression of video -- so there is always some loss -- but that doesn't necessarily mean a noticeable loss of quality.
If, when you say AVIs, however, you mean DV-AVIs -- the video you get when you capture video from a miniDV camcorder -- then, as I show you in my books, you are using a very special file that has some unique characteristics. When you edit DV-AVIs in Premiere Elements, if you output a DV-AVI and you do not add any effects or transitions to your video while you're editing it, the output just moves the same video data from the old file to the new.
So DV-AVIs are one of the few files that CAN work through way through Premiere Elements without any loss whatosever.
I agree completely with Steve. The DV-AVI is about as good as it gets. It is very slightly compressed, and that compression is virtually unnoticed by the human eye. One must look very, very closely, and with side-by-side comparissons, to see it, if they even can.
The only two options, that produce perfect results are to go with AVI Uncompressed (really monster files), or to use a lossless CODEC, like Lagarith Lossless, or UT Lossless. For all but the most critical situations, going either route does not yield noticablly better results. You just cannot see the difference with most footage. The down side is that with the former, the files will be extremely large, and with the latter, one must download and install the appropriate CODEC's. If one is Sharing the files with others, or to other computers, that CODEC must be installed there, as well.
Both the Lagarith and the UT are fairly quick, both for encode and decode, but do take a little more computer overhead to process. One sees this in time to Export/Share on the output end, and then with the Import on the input end. I use either Lagarith, or UT, when I am Exporting for processing in other programs, like Adobe AfterEffects, and then need to Export from there, for more editing work back in Premiere. It is only when I will be needing to create multiple generations of a file, that I will use the lossless CODEC's. For general work, I stick to the DV-AVI for everything, just as Steve mentions.
Also, and as Steve alluded, AVI is but a "wrapper," and can contain almost anything. The DV-AVI is a very particular, well-defined form of AVI. This ARTICLE will give you more background.
For your several questions...
One... download and try the 30-day free trials
Two... read in the user guides
CS5 User Guides - online and PDF (see link in upper right corner at individual pages)
P-Elements 9 http://help.adobe.com/en_US/premiereelements/using/index.html