The proper method is to use any program that supports importing dvd's and "Extracts" the mpeg2 video files from within it's VOB container.
The VOB files on the dvd are containers, the VOB files can hold more than one mpeg2 video file, so when you rename the vob to mpg IF there is more than one mpeg2 video file in the VOB container then your mpeg file is technically corrupt. To fix this issue you have to render it to a new mpeg2 file. The VOB containers may also contain subtitles along with other data or additional audio tracks.
Renaming the vob container can work, and also may not work. Depends on the source videos & authoring program. This can result in the program failing to render or crashing. Editing mpeg video is tricky if you don't know the source (how it was encoded & extracted from the media).
The best method is to use the import dvd feature, many other programs also have this feature, VMS, Vegas, Nero etc.
If I were doing this, since you're only adding to the existing video, I'd probably demux the video and audio that's in the vob using TMPGENC. That way, you can pull the demuxed mpg files into DVDA to author (along with the new stuff you have rendered to mpeg in Vegas) and the old video won't not be reencoded and suffer the quality hit. (The audio might, depending, but that would be less of a concern to me since home video audio usually isn't that great anyway).
Of course, if Vegas can act as a demuxer and let you save the demuxed video stream without reencoding (I don't know if it can, I'm still using an older version), then you can use that.
Ted, rendering to DV .avi as an intermediate would allow editing to go much faster, but it would also introduce more quality loss as you'll be converting from one compressed color space to another, and then converting back again. It's better to do an MPEG -> MPEG render than MPEG -> DV -> MPEG. Of course, you could use uncompressed AVI, but then you'll still get some more loss when re-encoding to MPEG at the end.
Starting with Vegas 8 there is now an MPEG smartrender feature that won't re-encode frames that are just being copied. This means that in a cuts-only situation you'll get no loss at all rendering MPEG -> MPEG, so in this case changing to DV or AVI would be a much worse choice.