V7 DVD import works great, but you have to be patient. Very patient. After the import, there is a pause where you don't know what's happening. but after a while, everything appears in the media pool. (at least my system has a long pause).
If your DVD is 5.1 audio, set the project properties to 5.1 before you import.
If you are having problems previewing mpegs, convert it right away to DV or something. Once you get it in vegas, turn preview off, put the mpeg on the timeline, render out to DV. However, my V7 mpeg timeline processing is much quicker than in V6.
Haven't tried this on V7 but in V6 Vegas has a problem with importing VOBs from anything.
Needed to convert several DVDs that I'd authored to NTSC and the source tapes were long recycled (not by me, OK).
Now you can drop the VOBs directly onto the T/L however where they join you may or may not have an issue with vision and audio glitches, they may show up as red frames or not.
Anyway the fix is simple enough. Use DVD Shrink to merge them all into one humungeous VOB file and then drop that into the T/L. If you're having issues with mpeg-2 and external preview then I'd render that immediately to something easier to handle like DV.
Now a word of caution, if you're doing this in NSTC land I'd be a tad nervous. Your footage started out as 4:1:1 (assuming you shot DV25) and then went into 4:2:0 on the DVD and now you're going to render back 4:1:1, edit that and then probably encode back to 4:2:0 and I wouldn't be at all surprised if thinsg started to get a bit ugly around now.
You might do better by your footage if, once you've got it all the mpeg-2 VOBs on the T/L, rendering to the Sony YUV codec, bigger files for sure but at least you should get less quality hit.
I haven't tried this as I'm in PAL land so not so much conversion going on. I'd suggest doing a short test and compare. I might be raising unnecessary concerns.
You could also render to cineform - i think it would preview better than Sony YUV - probably have to make a custom template though. If it was me I would just work from the timeline with the raw mpeg. you can still preview without lockups if you turn off the external preview...right?
Importing DVDs in V7 is much better than in V6. I was never able to successfully import in V6. First try in V7 worked great, with 5.1 surround. A DVD I authored.