What's the best video/audio format for PPCS4?

Question looks like a simple and stupid one, but I've noticed many differences using various kind of file extensions.
For example when you have to put an effect.
Mercalli is very performing if the effect is applied to an .avi file instead of a native .mpeg file taken from my Sony HDR-SR videocam.
So the question is:
If I have to change the video file format, what is the best one (or one of the best) I can use?
Avi, we know, is an uncompressed (and eavy) one, but, if you have 700/800 file to edit, maybe PP could go slowly. Am I wrong?
Of course I have tried using the same video strip differently converted.
Wait helps.
Many thanks,
Ciao
Giorgio

Re-thanks Harm,
I know about .ac3 audio problems, I've posted a discussion time ago concerning this trouble.
But now I'm mainly looking for a video format.
Example:
clips in native video compression are 'round 25Mb each
converted in .avi file can reach 630 Mb
Honestly I'll fill my entire pc with a format like this.
What I'm asking is a suggested kind of file that can easily work with PP and if you know a sw that do it.
I have Tmpge but I do not know  how to set it for the best results (unless I just set AVI output with the problem mentioned above).
I've read on the forum that DV AVI could be a good chance but which good sw can give me this files?
Ciao
Giorgio

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