It is always a good idea to use the hdd to save temporary stuff to. On the fly copying is not recommended, even not with two drives.
There are alot of options concerning software: Freeware: DVDShrink, DVDDecrypter, VobBlanker, DVD43. Shareware: AnyDVD, CloneDVD, and much more.
These are only a few but they should guide you somewhere. Just get them, try them and find out what you like most. They are all very easy to handle.