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All I can do is agree with you: the raw video data in iMovie (or whatever iFuckYourProjectUp product Macs come with) looks great. Converting it made it looks like absolute shit, even burning it to DVD was a waste of DVDs--it still looked like shit. I was doing the editing and a "professional" walked me through the numerous crashes I experienced. He was baffled why I needed to convert the video to anything but the raw video, as he just saved the raw data and played it fine in his iBook.
My recommendation: use Avid. A team of students at my university put together a great video using it. I don't know if it was the free or "bought" version. They had a lot of problems importing various video clips into the program, but once they figured out some magic process that let them import the videos, they said they had no problems. And their video looked fairly clean once exported to DVD.
Personally, I used a combination of Windows Movie Maker, DVD Flick, DVD Shrink, Windows Media Encoder, Paint.NET and Audacity to make all my movies. The look just as clean but with a bit more time spent converting things with WME.
I am currently running Kubuntu OS, and haven't had the need to make movies.
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