MPEG or AVI in PPro CS4 - which is better to work with?

Question

Back when I was using older versions of Premiere Pro, I was forcefully told by people here on the Adobe forums that I should avoid doing any editing work in MPEG format.  The emphatically-worded advice was that I should do everything in AVI within Premiere, and export it as AVI, and then let Encore handling transcoding it into MPEG form when the time came for that.
There were several reasons for that.  One was that several people told me that MPEG's lossy nature meant that the more you edited and re-saved a file, the more quality you lost each time.  I was told that AVI avoided this problem.  Another reason for it was that Premiere Pro's handling of the MPEG file format was extremely buggy - which is indeed a phenomenon I experienced firsthand.  I struggled a LOT with how Premiere Pro handled MPEG files in those older versions.
Now that I'm asking questions about CS4, having just upgraded 3 weeks ago, I'm seeing a different trend in the comments people are making.  Now, it seems, the advice is that it's better to do my work within MPEG. In a different thread, I was told that Premiere Pro can no longer format chapter markings for Encore as part of AVI files, but that functionality does exist now with MPEG.  And other comments in other threads seemed to favor working in MPEG.
So, has that changed?  Is MPEG now the "preferred" format to use for files when editing and exporting video footage?  Isn't lossiness still an issue?

Answer 1

The key is to keep the footage in its source format and codec as long as possible, changing only when the final export is ready.  If you need to convert your footage to another format and codec to edit it, then choose a lossless or near-lossless codec:
For AVI, uncompressed, Lagarith and UT are good choices.  Uncompressed is huge and slow; Lagarith and UT are much faster and much smaller in file size.
For MOV, Animation and Photo-JPEG are good choices.
For MPEG2, I-frame only MPEG2 at high bit rates like 100 Mbps is a good choice.
If you are exporting to MPEG2 DVD, it really doesn't matter if you let Pr or En do the MPEG2 encoding; the encoder can be set identically in both applications.  With the new Dynamic Link from Pr to En in CS4, it makes a lot of sense to send the sequence to En and then let En transcode it.
-Jeff