IMovie Quits When Mounting .dmg

Question

Hello---I have an iMac 10.5.8.  Today I began converting old 8mm home movies onto DVD by use of a Toshiba.  I am importing non-commercial DVDs into iMovie.  I was so proud of myself when I figured out (through use of old forum) how to take the DVD and create a new image and mount into iMovie '08 (7.1.4).  I did this successfully first try and was on cloud nine.  Now editing can begin. 
Well, feeling on a roll I went for a second 8mm and got it onto a DVD.  Went through all the steps (application, utility, disk utilities etc.) now it is sitting as a .dmg file on desktop, same as before.  This time, however, after I launch iMovie and double-click the .dmg home movie----iMovie will read "Generating Thumbnails" for a few seconds and the blue bar will appear as if it is a 1/3 done and it will suddenly quit and this is the message I get:
(Oops.  Picture missing.  Edited to add message reads: "The application iMovie quit unexpectedly.  Mac OS X and other application are not affected."
I tried to report the problem to Apple but it says it can't be done at this time and retry.  What I can't figure out is I have done it already and it worked fine.  I shut the computer down for a while and I came back to looked at some other ideas/posts but most were way too advanced for my knowledge and I didn't come across any with same exact issue anyhow.  They may be there, but I didn't come across.   I followed some posts that were close and I checked my HD in disk utilites and it came back my HD appears to be working fine so didn't seem to be anything to repair. 
Can anyone give me a kindergarten explanation of how to correct this so I can continue putting .dmg files into iMovie?  Why did it work just hours previously but not now? 
As always, thanks for your help.

Answer 1

You need to convert the VOB files in the TS-Folder of the DVD back to DV which iMovie is designed to handle. For that you need mpegStreamclip:
http://www.squared5.com/svideo/mpeg-streamclip-mac.html
which is free, but you must also have the  Apple mpeg2 plugin :
http://www.apple.com/quicktime/mpeg2/
(unless you are running Lion in which case see below))
which is a mere $20.
Another possibility is to use DVDxDV:
http://www.dvdxdv.com/NewFolderLookSite/Products/DVDxDV.overview.htm
which costs $25.
For the benefit of others who may read this thread:
Obviously the foregoing only applies to DVDs you have made yourself, or other home-made DVDs that have been given to you. It will NOT work on copy-protected commercial DVDs, which in any case would be illegal.
If you are running Lion:
From the MPEG Streamclip homepage
The installer of the MPEG-2 Playback Component may refuse to install the component in Lion. Apple states the component is unnecessary in Lion, however MPEG Streamclip still needs it.
To install the component in Lion, please download MPEG Streamclip 1.9.3b7 beta above; inside the disk image you will find the Utility MPEG2 Component Lion: use it to install the MPEG-2 Playback Component in Lion. The original installer's disk image (QuickTimeMPEG2.dmg) is required.
The current versions of MPEG Streamclip cannot take advantage of the built-in MPEG-2 functionality of Lion. For MPEG-2 files you still need to install the QuickTime MPEG-2 Playback Component, which is not preinstalled in Lion. You don't have to install QuickTime 7.