If you use AVI and then choose No compressor, you will get the largest files but the best quality. You can always downgrade the quality later if you need it. The other codecs inside AVI will give you varying quality.
What I would do is go to uncompressed AVI (hard drive permitting :)), then edit and then use the Create Disc function. Yes, you will need to reencode at that stage (and it could take a while).
You could do it quicker by using MPEG2, but it would need to be set up right. What options do you get from MPEG2? Is there an option to capture directly into DVD format? If you get an option to capture into PAL DVD (unless you have NTSC TVs), then do that and you should be able to go straight to disc and save some time.