iMovie is pretty good, but lack some major features. If you have a DV camera it works well, but if the camera isn’t supported or you only have the DVD it can be difficult to get a file format that works with iMovie. It took me hours to find the right settings to convert the .vob files from my cousin’s DVD Camcorder. Good luck to anyone else with this issue.
First, you need to get OpenShiiva. It will convert the VOB file to an mp4 format that iMovie likes.
Start OpenShiiva and modify the settings on each tab as follows.
Files
Input File: Pick your .vob file
Output File: Pick your .mp4 output file
Debugging: xvid altivec, libmpeg2 altivec, multithread should be checked
Crop & Scale
Uncheck all
Luma bicubic/chroma bilinear
Video
Encode Video, XviD should be checked
No changes to other settings
Subtitles
Uncheck all
Track 0 (0×20)
Audio
Decode AC3 Audio, Encode Audio should be checked
Track 0 (0×80)
Uncheck the rest
Processing
Click Go! This takes a while. My MacBook Core 2 Duo processes 9 frames/second.
After the file is done, open iMovie. The File\Import Movies… and pick the mp4 file you just created. This will take a while as iMovie copies the file and parses it into thumbnails. From here you can edit the iMovie project like normal.