I am digitising a collection of Hi8 camcorder tapes. I am saving the master files as AVI because I would like to edit the files later to provide different content for different people.

However the AVI files are taking a huge amount of disk space. My assumption is that if I save the masters as MPEG, then edit them and re-save the edited versions as MPEG it will lower the quality by compounding the compression artefacts. Is this correct?

If so is there is there a format suitable for masters that will reduce the size compared to AVI yet enable multiple editing without introducing compression artefacts?