I have heard nothing but bad reports about those dvd cameras, I'm sorry to say. As far as I know, their only benefit is for people who want to for exmaple shoot a holiday video and then be able to watch it on dvd, without having to first suck it into a computer, then burn a dvd etc. They have not been made to be edited from.
However, I worked out a workaround of my own for a different but similar problem. Do you have access to a mini-dv camera (your basic cheapo consumer camera)? If so, put the dvd from your canon into a dvd player, and plug the outputs from the dvd into your dv-cam camera. When you play your dvd, it should play out to your dv-cam camera (can't think just now if the camera has to be in play or record mode - too late at night! - but think it should be in play mode...). Now, what you want to do is record on your camera, let it roll for 10 seconds or so, and then press play on your dvd. This way you can transfer whatever footage you want onto dv-cam, which can then be used on any editing package.
Total pain in the arse I know. I suggest you have severe words with whichever c**t sold you this camera.
As for editing packages, iMovie (free with Macs) is really bad in a lot of ways but, if you have never edited before, it's good for getting to grips with the principles of editing and you can basically do all you need to do to make a nice, decent edit. It has extreme limitations though and is very frustrating for anyone with experience of any better software.
I edit on Avid, but Avid software costs BIG bucks, and tends to be well protected. If you are looking for a happy medium, I'd suggest Final Cut Pro - it's a cracking editing package and I wouldn't have a bad thing to say about it.
