Original AVI destroyed. Need to edit MPEG-2 and preserve quality

[neophyte]

I can understand if my question is too fundamental to warrant a response. I've spent hours and hours researching and decided I need help. My brother and I paid $1059 to have old (from 1950 on) family films, no audio, converted to DVDs and told them specifically and clearly that they would then need to be edited to add titles between original reels and to put everything in chronological order. When I received them I started talking about the next part, editing, and I was told the AVI files had been deleted. Sensing my immediate frustration, everyone started telling me there would be no noticeable loss of quality to convert back to AVI and edit. After research, I don't believe that and it's too late to stop payment. Maybe I'm all wet, but I think I could have used something as simple as Windows Movie Maker to do what I wanted with AVI files. I'm afraid I may be toast. They still have the MPEG-2 files they used to make the VOB files on the DVDs (3 total DVDs) which I will get before they are destroyed. Is this salvageable? The only reason I paid to do this was to save these family memories and keep as much resolution as possible. I'm hoping I don't have to pay to have this done all over again. The loss from going back to AVI may be so severe as to make it not worthwhile. I would sure appreciate any advice. If need be I'm prepared to buy a better PC and the right software and do it myself. My Apple friends think owning one of them would solve all my problems, but I don't think they understand what they are talking about.
Any advice would be greatly appreciated.

[zoobie]

relax...you still have the films, right?
there are some mpeg editors that don't re-encode...take a peek in tools
with the help of this site, you can do it all yourself, add audio, and probably end up with a better production at a fraction of the cost

[johns0]

You can use tmpgenc dvd author to edit the mpgs while you author them to dvds.

[lordsmurf]

It is true that extraction back out to an uncompressed AVI, editing, and re-encoding with smart settings with a quality encoder would yield no noticeable loss. But as you can see, it takes some skill to accomplish this, and the right tools.

VirtualDub (one of the modified versions) will open the MPEG-2, and you can save it to uncompressed AVI. This is about 75GB/hour file size, large drives are a must.

Next, an editor like Adobe Premiere is what I'd use. Not the weeny Elements version, I use the pro versions, either 6.5 or CS3. Edit as needed.

Then re-encode with the Adobe Media Encoder / MPEG Encoder. Export with a good setting. Probably not a preset, tweak the bitrate to maximize the disc, without going above DVD-Video maximums, or below the image quality threshold (about 6000k 2-pass VBR for 720x480 video). These can vary, depending on the quality of the film source videos.

If you only need to splice ("editing" with scissors), cut and remove, re-arrange pieces, then none of this is needed. Simply use Womble MPEG Video Wizard.

Windows Movie Maker is not an option, pretend it's not even o the computer. It's crapware.

[neophyte]

I am very grateful for all of your responses. I really appreciate you taking the time to calm me down about this.

Since all I really want to do is cut sections and rearrange them, plus add titles at the beginning of what was originally a reel, I think I will take the suggestion to get Womble MPEG Video Wizard and edit the MPEG files. I had read about their product before, but I read something else that led me to believe that editing MPEG was not a good idea. But you've convinced me that I can do my simple edits without losing anything. I'm planning on getting a new PC at the beginning of 2009, so I will try it on that.

You don't know what a relief it is to find a place where people actually know what they're talking about.