MPEG is highly compressed, contains "empty" frames for wont of a better simple explanation. Editing MPEG can cause black frames to be selected, as Vegas doesn't edit on I-Frames only. The high compression of MPEG at the consumer or prosumer level requires recompression of the file in most instances, compressing a file that's already been compressed once, further compromising the quality of the image. Most folks in here are interested in raising the quality of their work rather than lowering the quality of their work. It doesn't matter whether anyone 'agrees' on whether MPEG is a lower quality editing format, mathematically and visually it is an inferior format. The color sampling of MPEG also makes it difficult to do a lot with the image in the editing stage. DV-AVI is also a compressed format, but not nearly so much as MPEG is. Further, MPEG is not native to most editors, Vegas being one of them. Therefore, the file has to be transcoded on the fly, slowing down the playback and editing process even further.
MPEG is a delivery format at this level, not an archiving, editing, or shooting format. There are MPEG schemes for some tools that are exceptionally high bitrate, different color sampling/subsampling schemes that are found in very high end gear that cost tens of thousands of dollars, but if you were in that world, you'd likely not be posting here.

MPEG edit ... bad.

AVI edit....good.


Hope that helps.

That all said you CAN edit a MPEG. I do it all the time. How successful depends on source and how careful you are editng. The blank frames can be a killer.

The point I think everyone is agreement on is if you don't have to, don't. IF you must then first 'freeze' the MPEG at the quality it is by converting to AVI. This is to avoid compressing a file that's already compressed.

The best approach lies outside of Vegas. Virtual Dub (free) will handle most MPEG files, but not those created by Veas with the MC encoder that are MPEG-2. Don't know about MPEG-1, never tried.

For a more technical discussion of MPEG compression and why trying to edit it is "risky business" read the following. Be sure to click on all the embedded links to understand the technical parts or you can get lost quickly.

http://www.bretl.com/mpeghtml/mpeg2vc1.HTM

The short answer is editing a MPEG doesn't work very well because there's too much guessing going on which depending on what frames you edit and which ones can get you in deep trouble because no "real" data is there.

Good advice.

One other thing - if ALL you want are cuts-only edits, and being limited to 2 edit points per second are OK, there ARE editors that will do this directly with MPEG that ONLY allow these edit points. Then they need no AVI conversion, no re-encoding, etc. It's a fast operation, if limited. Womble makes one, Mediaware makes one; I'm sure there are others.