Which format should I choose?

[film]

We have chosen a professional company to transfer some Video8 tapes to digital format, they are offering the following:

"We can output your cassettes to editable MS DV AVI or QuickTime(Sorensen) files or MPEG4 on external drive"

Which format should we choose?

[usually_quiet]

As stated, MS DV AVI would be better if you want to edit the captures. MS DV AVI is also likely to be the original capture files, and it is always good to have those available. However, nothing that you own other than a PC is likely to be able to play MS DV AVI from a hard drive, so you would need to convert MS DV AVI to some other format for usability.

[Cornucopia]

Likely that company is using a Digital8 cam's analog pass-through capability. Makes the workflow consistent.
Ultimately it isn't the MOST ideal (because of dv compression and of color subsampling). The alternative would be an uncompressed transfer, but they or you might balk at the greatly increased file sizes (dv is ~25mbps while uncompressed is ~270mbps for the same sd material). Often dv is "good enough".
Yes, with dv you will have to do an extra recompression step to get common, consumer-playable h264 mp4 files. But going the dv way, you can better edit what you want, you still have a higher quality original (vs those other 2 suggested ways), and you have total control over the parameters when recompressing, giving a good chance that your 2nd gen mp4s might look quite better than their 1st gen (is it really though?) Mp4 caps.

DO.NOT.GET the sorenson for any reason. Yesterday's mediocre codec (long since surpassed) using a deprecated container.

Scott