I think you're going to just have to experiment to find the best way, but in my experience, there is NO WAY go re-edit mpeg2 without losing quality - especially where you have motions or pans.
You can, however, reposition the vob files by renaming them as mpeg files and create new menus, etc. The problem is when you want to re-edit one of those files.
One thing I haven't thought about though is that you're going analog. You're already taking a hit by not going digital, but it actually may not be as bad as dealing with compressed video with motion.
Good luck and let us know what happens.