If you have pinnacle studio, why aren't you using it to edit your avi video. It is a pretty good editor too.
I would recommend getting an ADS firewire card, but others will do a great job. The idiot at Staples doesn't know what he is talking about. Firewire is still the preferred capture mode. It isn't just the raw speed of the transfer, it is the stability of the transfer that is important.
If you are capturing as AVI, then you shouldn't have to worry about re-encoding when you edit. You edit first, then encode. As for the quality, when you encode, are you making sure that the pinnacle studio settings for encoding, are set to BEST quality?