The general approach is the same as audio...
Use the best, least-compressed* format for editing, minimize the number of conversions, and compress once as the last step. The best format for editing standard definition video is usually AVI/
DV (about 13GB per hour). ("AVI" is a "wrapper" or "container" format, and it can contain anything from DV to DivX.)
And for the best quality, use a high bitrate. 6000kbps MPEG-2 is good quality, and you can fit about 90 minutes of 6000kbps video plus Dolby audio on a single-layer DVD. If you use LPCM audio, you'll have to use a lower video bitrate.
Regular DVDs are MPEG-2, with either LPCM (uncompressed) or Dolby AC3 audio. All players are required to play these formats. Other adio formats (like DTS) are optional, so a disc with DTS also needs an LPCM or AC3 track in order to play on all players. PAL players are also required to play MPEG-2 audio.
There is a chart on
this page showing the compatible formats for NTSC & PAL DVDs.
(Most of the "SE" versions of Video Studio do not support Dolby.)
* We are usually working with uncompresed audio, but most home-video formats (including DV) use
some compression.