I third using uncompressed files. I use avis and every five minutes is roughly 1GB. I have my episodes ripped on an external at 850 or so gigs. I then drop the clips into VideoStudio and work with those. Same wth music. I convert my mp3s into wav for better quality. Then I use MPEG Streamclip to convert the finished product to mp4s which I find are the best quality on the net on or my big screen tv. My finished vids are generally about 50 mbs for a three minute vid.

If you want lots of helpful advice by people smarter than me, try this forum: http://fpvideos.proboards.com/index.cgi

This is where I learned to vid by following their tutorials. Any time I had a question they helped me through it.

Good luck and have fun.