Using MTS files with iMovie

I'm having a real nightmare working with .mts video files.  I'm not sure if this is the best forum to discuss, but I'm willing to try anything at this point.
I have a Canon Vixia HFR20 camera that saves in .mts format, and I'm trying to find a good way to edit/convert those videos with iMove '11 to be posted on a website and burned to DVD.  Does anyone have any suggestions on how best to go about this?  I have found a few free converter programs like WinX, but the results always look kind of crappy - lots of jagged edges and what not.  My other main problem is that the .mts files appear to split after they reach a size of 2.05 GB so even though I'm only shooting one continuous video, I end up with 2 or more files.  If there's a way to import the seperate files as one continuous video that would be fantastic.
I've recently tried using the "import from camera" feature in iMovie instead of copying the files from the SD card to my computer, but I could not get iMovie to see a camera other than the built in iSight.  Is there a possibility this "import from camera" might be the best solution and I just haven't got it yet?
I feel like I'm forgetting some important information because I'm kind of flustered so don't hesitate to ask.  I'd appreciate any guidance.

The format iMovie uses when you edit video after it's imported is Apple Intermediate Codec, it will have the file ending .mov but internally it's set so the Mac can edit individual frames easier and play them back easier at full speed. If you have the option of saving to QuickTime .mov see if there is a pulldown list of all the different "codecs", that's the style or flavor of compression applied to the video frames. If Apple Intermediate Codec (AIC) appears on that pull-down list choose that as your codec when you save to .mov.

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