Ok, I do a LOT of video editing from DV, and I'm going to recommend that you spend a little cash and get some commercial software instead of using the 'free' software. I'd personally recommend Ulead VideoStudio. It's only $69 and it's
awesome in some of the things that it can do.
http://www.ulead.com/vs/runme.htm You can even go to their website and get a trial download. Pinnacle also makes a good product, but I like ulead's better.
Anyway, with regards to the pictures - some cameras have two ways to record still images - On some type of memory card/stick that can come out or on the tape itself. By capturing the video with this second method you would have those 'pictures'. Remember, they are not going to be the same quality as stills from a reguar digital camera.
You should also be aware that video editing takes a LOT of space. It takes about 13 gigabytes to store just 1 hour of video.
Good luck!