Working with big files

I would appreciate any suggestion as to how best one can work with big files.  I have eight one hour tapes containing information about various places I visited.  Some contain only one place while others can contain two or more places. As a preference I like to create up to one hour DVDs that contain an identifiable segment; eg either one place only or more but I do try not to break up a place and record it on two DVDs.  However, the problem I faced in the past, is that by the time I get to the end of an hour, the program Premiere Elements 7 (PE7) is getting slow and keeps telling me that it is running out of memory. That is despite the fact that I have 3 GM of RAM and over 200 GB of dedicated separate hard drive.  I tried saving segments under ‘Share’, ‘DV AVI’ and selecting ‘DV PAL Standard’ (the system I use), but the result, as far as quality was concerned, was very disappointing. There is no option to change or set quality as was the case in previous versions of PE.  Nor can I combine two .prel files into one while I am editing. 
Is there any other way I can work in segments, say 15 minutes, and combine them at the end without losing on the quality? 
Any suggestion would be most appreciated.
Tom 

Hi Steve
It is a Sony DCR-HC40E PAL, and they were captured as AVI clips.
The project settings are:
General – not highlighted but it shows DV Pal and 25.00 frame/second
Video – 720 horizontal 576vertical (4/3)
Display format - 25 fps Timecode
Capture – DV Capture
Tom

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