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in Vegas you can actually drag the .VOB files from the DVD and drop 'em right on the timeline.
Yes you could do a live transcode from a video source, through the DVX, to firewire. But if the DVD you're trying to import is copy-protected, it won't work.
And if the DVD isn't copy-protected, why go through a DVX to import it -- why not rip the MPEG directly to an AVI file you can put on your timeline? I haven't tried this in Premiere, but in Vegas you can actually drag the .VOB files from the DVD and drop 'em right on the timeline.
Dimes to donuts, the reason the DVDs play in the recorder but not your computer is because the DVDs are not finalized. Typically, a DVD recorder will be able to play back a disc it has burned but not finalized--at that point the DVD is essentially a data DVD. Once it's finalized, navigation information and other critical files are written to the DVD to make it conform to the DVD Video standard. Until you finalize the discs (process varies by recorder, so RTFM), they won't show up as anything in your computer DVD drive.
As far as getting the content into PPro, what you're suggesting will work fine. Simply take an analog out from the DVD player, run into the DVX, and then run firewire from the DVX into the computer. The DVX is functioning as a D/A converter then. If you're only looking to use pieces of these DVDs, this probably makes more sense than ripping and converting the DVDs anyway--no need to waste the space on material you won't use. That said, you could probably go back to the original VHS tapes (if you have them) and bypass the DVDs altogether. I find that DVDs are kind of a bear to navigate when you're looking for specific footage.