Of course you can Demux a VOB file into elementary MPEG streams and then convert them into AVI for editing. Or you can edit the MPEG file right into an MPEG-capable editor such as Adobe's Premiere, MainConcept's EVE or NeroVision Express.
Whatever editor you use, it will convert the file to MPEG after editing. As MPEG is a lossy compression, you will lose some quality due to this second encoding.
I don't know exactly how to convert from VOB to AVI. Usually I do it the other way around :-)
To minimize quality loss, you should rip the DVD (without compressing) then edit and then run Shrink on the edited files.
Maybe IfoEdit or VobEdit can help you to demux a VOB file.
There is another way: the "Set start/end frame" feature of Shrink. It's very easy to extract a part of a movie. I never tried to extract several parts.
Just give it a try: use "Set start/end frame" several times on the same movie, selecting each time a part you want to keep. Then backup the movie and check whether Shrink has skipped the parts you didn't select.
I tried: it doesn't work. You cannot select several parts of the same movie with DVD Shrink. But you can add the same movie several times in re-authoring mode. And this will serve your purpose.
Imagine you want to cut 2 scenes out of the movie. This means you want to keep 3 parts:
1) before the first scene
2) between the first scene and the second scene
3) after the second scene
Run Shrink in re-authoring mode and drag the movie onto the left pane 3 times. In the first copy of the movie, select the first part. In the second copy of the movie, select the second part, and so on. Finally click on "Backup".
The only problem is that you'll get 3 titles on the disc. They'll play sequentially but there will be a brief pause between them. You need to join them if you want them to play smoothly as a single movie. Dvd2one can join titles. And I bet IfoEdit or VobEdit (free) can do so as well (but maybe not as easily as Dvd2one).
All in all, it's quite an easy way to edit movies. And it saves image quality (you only lose quality due to the compression, not due to the editing).
