Formats and quality

After collecting Mini DV tapes for many years, I'm now trying to edit them and write to DVD. I notice differences in DVD playback quality depending on the source files. I have some basic questions ...
1) The files I read in via Firewire through Windows Movie Maker seem to default to AVI. Is this the best quality version I could have ? The files are around 13GB per hour of video.
2) I want to "backup" these precious DV tapes. What are the best media and file formats for doing this given the size of the files ?
3) What is the best format for outputting to DVD ? Using Roxio Easy Media Creator 8, I've created DVDs using WMV and AVI as sources. The AVI was blurry, but as the file was bigger I thought it would be better quality - obviously not !
Any advice appreciated.

Im guessing what you are trying to do is basically create a avi for each mini DV tape and then dump the avi to a DVD, I think a better way would be ditch the movie maker software, and ideally use something like adobe premiere or similar product (although it cost money).

You would then basically capture your DV tape, and output straight to DVD from premiere, this will compress to MPEG2