I find the format limitations of Windows Movie Maker to be so irksome that it is not worth using. It causes people to convert just to import their videos, then the output doesn’t play on any standalone dvd players without yet another conversion. This degrades the quality of the video quite a lot.
WMM is not a general purpose editor. It is, as you say, meant for home movie editing.
If you are starting with dvd-video, you can use a free conversion program called SUPER to convert to .wmv format before importing into WMM. http://www.videohelp.com/tools/SUPER Use the direct link at that site, so you don’t have to wade through several pages of propaganda at the SUPER site.
You’ll still have the conversion->edit->conversion problem using WMM.
Have you tried other programs for editing? AviDemux can handle most formats, including mpeg2 found in dvds. If you need frame accurate cuts in mpeg2, you’ll want to look at the commercial programs from Womble or VideoReDo.