I copy all DV as AVI files, however these are VERY large files .
This format is good for editing with, after this I encode to MPEG2 and write to SVCD...this compresses the file to a few hundred MB's.
Example - AVI file was 5.75 Gb encoded to MPEG2 reduced to 495Mb.
Once I am happy with the results I save a copy to VHS tape (just in case - albeit at a lower quality) and delete the AVI file. Any future copies are written to SVCD from the MPEG2 file (which I keep on the HDD.
For the editing I use Studio 8 which captures, edits and encodes ready for the writer to finish the job.
Hope it helps