Transcoding and managing DV AVI files

I use APP2.0 to create photo/video montage, utilizing most of the video transitions. I have always encoded the videos in APP2.0 as MPEG2-DVD (8 Mb CBR 1 Pass) then import them into AED2.0. Now I would like to see if there is any gain in econding the videos as DV AVI in APP2.0 and then transcoding them in AED. I have not gone this route so far because of the huge DV AVI file sizes.
Here are my questions:
1. Do you think, with the type of video I am creating, that there would be any benefit to encoding the video as DV AVI as opposed to MPEG2-DVD in APP2.0?
2. After importing the DV AVI file into AED2.0, should I go with the 8Mb/CBR/1Pass or 7Mb/VBR/2Pass transcoding?
3. For those of you that do this on a regular basis, what method do you use to manage your huge DV AVI files? Do you store all your projects on external HDs, etc?
Thanks so much,
Angela

Thanks JB and HM for your input! My videos consist of 1) still images and 2) some video clips (captured with APP) and 3) almost all of the video transitions APP offers. I rarely have a montage over 30 mins. Most of them run between 15 and 20 mins. With this info, would you say it is best if I stick with my current method of encoding (encoding in APP with MPG2-DVD at 8Mb/CBR/1pass then importing into AED)?
Some have asked me why I even bother with AED and why not just build the DVD directly from APP. The reason is that AED allows me to create a menu with the option of both single play and loop play, something APP will not let me do.
Thanks again!
Angela

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