I’ll answer your questions in order.
You’re basically creating a bunch or really long extra steps for yourself by converting them first. I would put them into my timeline to do the edits, and then output my final video file from there.
When it comes to “the correct DVD format,” that really doesn’t have anything to do with the video file. Whatever program you use to create the DVD should be able to take in whatever file type you output your final video to. That said, you actually need a program that will build a DVD for you, after you have your final video file. It’s not just a matter of burning a video file to a disc, and popping it into a DVD player, although some (mind you not all) DVD players will allow that. A DVD is basically a piece of software that only a DVD player is programmed to read. If you explore the files of a DVD in your computer, you’ll notice that there are folders and files that do not resemble video files at all. You need to have a DVD authoring program that will build all of this for you. I use Sony DVD Architect, but there are others on the market.
It sounds like you copied the entire folder from your camera to your computer. You don’t need to worry about all those other files and folders. Those are there for the camera to use, not you. All you care about are the video files themselves.
I hope this information helps you. Let me know if you have any other questions.