An editor-friend of mine asked the best way to extract content from DVD media for use in Final Cut Pro. I didn't have a full solution at the time but now I do. The required software is readily available (read: free):
Use Mac the Ripper (MTR) to decrypt the DVD and create native VOB and related files to your scratch disk. Next, use MPEG Streamclip to convert the VOB files into your desired format for Final Cut Pro. I used Apple DV/DVCPRO which creates a standard-def QuickTime MOV file; browse the conversion settings to ensure 100% quality, frame size, etc.
Unless you have substantial disk space don't convert complete VOB files because the DV/DVCPRO output setting runs at 25 Mbps. Instead, find your edit points in the source VOB files and send them to MPEG Streamclip's batch list. The conversion process runs quickly on my MacBook Pro 2.4 GHz.
Some additional tips and suggestions can be found at Kino-Eye and DigitalMediaNet.
Various people have suggested DVDxDV and Cinematize for better features or output quality, however you'll spend $80 and $130 respectively. Neither product will decrypt a DVD so keep a copy of MTR handy.