Best way to create DVD from videos from several events?

Hi all - I'm very new to iMovie and iDVD and was hoping for some advice. I'm making a compilation DVD "for the grandparents" of videos from a variety of the kids' events throughout the year. What's the best way to do this? By the way, I've switched to using iMovie HD but am still using iDVD '08. I've been prototyping a few things and came up with the following options:
Option 1: Create one iMovie HD project and import all the videos from the various events into one timeline. I then create the chapter markers as usual, then Share with iDVD.
Question: I want each of the event videos to return to the DVD Menu. How would I do that if all the videos have been combined into one timeline in iMovie HD?
Option 2: Create each event video under its own iMovie HD project. Export each video into .dv format (I don't know what the best format would be). In iDVD, insert each video.
Questions: Would I lose video quality going this route? If I wanted to create chapter markers within each event video, I assume I would lose them once I've exported to .dv format?
Which of the above would be a better option? Is there a better option?
Thanks!

If you make changes to your iMovie project, the next time you open your iDVD project a pop-up will inform you that assets have been updated and asks if you want to update. Click update and your changes will be incorporated. As long as you haven't changed locations of your iDVD project and iMovie project, iDVD will point to the ongoing iMovie project. But if you move your iDVD project to another drive, or rename the iMovie project, iDVD will tell you that there are missing assets because it can't find your iMovie project. At least, that's what happens to me when I do that.
Happy Turkey day!

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